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India - Nepal Development Partnership (21 August 2020)

India - Nepal Development Partnership (21 August 2020)

Why in News:

Senior diplomats of India and Nepal on August 17 held a virtual meeting to review the progress made on various India-aided developmental projects being implemented in the Himalayan nation.


The meeting came days after Nepal Prime Minister K P Sharma Oli telephoned Prime Minister Narendra Modi to greet him on India's 74th Independence Day, in the first high-level contact after bilateral ties came under severe strain. According to the Indian Embassy in Kathmandu, India and Nepal held the 8th meeting of the Oversight Mechanism (OSM) through digital video conferencing. The meeting carried out a comprehensive review of bilateral economic and development cooperation projects.


Nepal is one of the earliest recipients of India’s development cooperation initiatives and today, India is among its top bilateral partners.

According to the Development Cooperation Report 2019, India ranked fifth amongst the top bilateral development partners of Nepal for the financial year 2017-18, with USD 56.7 million in official development assistance (ODA) disbursements.

Since 1951, with India’s assistance, over 559 large, intermediate and small-scale projects at an estimated cost of NPR 76 billion have been implemented across Nepal.

The Nepal-India Oversight Mechanism was set up after Prime Minister Modi's visit to Nepal in September 2016 to oversee the implementation of bilateral projects and take necessary steps for their completion in time.

The ties between India and Nepal came under strain after Defence Minister Rajnath Singh inaugurated an 80-km-long strategically crucial road connecting the Lipulekh pass with Dharchula in Uttarakhand on May 8.

Nepal protested the inauguration of the road claiming that it passed through its territory. Days later, Nepal came out with the new map showing Lipulekh, Kalapani and Limpiyadhura as its territories.

In June, Nepal's Parliament approved the new political map of the country featuring areas which India maintains belong to it.

Summary of the Debate

Since there are only the Biharis on both sides of the Indo-Nepal ...Key Takeaways from the meeting:

  • India has a large number of development projects in Nepal and also other projects which contribute significantly to the Nepalese economy.
  • Given a variety of reasons in 2016, it was decided that, there would be a mechanism which is essentially a meeting between the Indian embassy and the government of Nepal to review these projects, look at any issues which are coming up and which can be resolved at particular level and this is the 8th such meeting which has taken place.
  • The meeting has the Indian ambassador along with his various officers who look after it and such projects as are represented in Nepal, and on the Nepalese side, the Foreign Secretary of Nepal heads it.
  • The most important thing about this oversight mechanism meeting is that it brings the entire government of Nepal, which is involved with the execution of these partnership projects on the same table.
  • So, the Foreign Secretary chairs the meeting but high level officials from all concerned ministries, departments and agencies of Nepal are present.
  • Usually these meetings are held at an interval of about six months but covid has resulted in this not having been possible for the last several months.

The kind of projects India is executing in Nepal:

  • Infrastructure Projects: The main focus is on connectivity, so India is building roads and railway lines. India is also focussed on building Raxaul-Kathmandu railway line on priority basis, the work has started. This meeting also reviewed the progress of the project. The 69-km Motihari-Amlekhgunj pipeline has been completed before its schedule. We also have hydro power projects
  • Energy Projects: There is very beneficial energy trade between India and Bhutan, the main foreign exchange earner for Bhutan is the Chhukha Hydel hydroelectric power project, a large portion of their ideal power they are exporting to India and they are making lot of money. Same kind of thing happened with Nepal also, because Nepal has tremendous hydro power potential and it has not been exploited yet, even Nepal is having the power shortage problem. India has fixed that very soon, they will be importing 600 megawatt of power from Nepal but that will happen in the future.
  • Irrigation Projects: Many of barrages have been made by India, that is irrigating the land in Nepal also, irrigating the land in India also.
  • Integrated Check posts: Four check post has to be created by India, two that is Vir gunj and Virat nagar has been operationalized, but two more has to be completed.
  • Community development projects: High impact Community development projects are also being undertaken.

                      Indian Diplomacy on Twitter: "Development outreach #IndiaNepal ...


  • China is also making the Trans Himalayan railway and connecting Nepal with China.
  • India has been accused of delaying the project and the stipulated time has been a challenge.
  • India and Nepal are still discussing the water use of Mahakali river or Sharda river since 1996. Both the country has not been able to make progress of Pancheshwar multi-purpose project on Mahakali river, which is having a potential of at least 5000 megawatts.
  • The Arun-III hydropower project has finally been done in the month of May, it’s a 900 megawatt project, the loan amount is 6.5 thousand crores plus equities, that again started in 2008 but has been completed now.
  • One of the biggest problems is availability of Land; the process of getting a land in Nepal is very difficult.
  • Some of the elements of work in Nepal, for example; Railway line is extremely difficult to do technologically, it is very difficult, these are young fold mountains and building the railway tracks is not so easy.
  • Some of India’s contractors especially the best contractors in 1970s and 1980s,they used to go Nepal, now they don’t find it worth to go there.

Way Forward:

  • Nepalese need to understand that their interest lies in being able to leverage a positive relationship with India and this something that is an important element.
  • The special relationship between both the countries has got to be maintained and should be maintained.
  • Both countries have civilizational and cultural ties and it should be strengthened. Both countries signed twin cities. So, for Hinduism, the Vishwanath and the Pashupatinath (Varanasi and Kathmandu) twin cities and for Buddhism, they have brought Bodh Gaya and Lumbini together and the third twinning is for Ayodhya and Janakpur.
  • People to people relationship are already excellent and should be strengthened further.

Important points made by the Guests

Manjeev Singh Puri, Former Ambassador

  • Nepal is actually the starting point of India’s development partnership way back in the 1950s.
  • The Prime Minister Oli telephoned PM Narendra Modi on the occasion of our Independence Day; they had a conversation which included India’s election to the security council, the actions on covid that the two countries are taking.
  • After that we have this highest level possible dialogue at the level of the embassy and the Foreign Ministry i.e. at the Kathmandu level, which reviews the entire gamut.
  • Even while we are talking about all the southward bound movements in terms of political and diplomatic relations with Nepal, normal things have continued, trade has continued, development partnership projects have continued, in fact the Indian Embassy has signed the project proposal to the Nepalese government for sanitisation project in the Pasupatinath Temple.
  • Nepal has their own issue with development projects, they tend to have partnerships with people in Nepal, they are just a front bidding for the contract for the sake of the people, the people in Nepal don’t have the ability to deliver but they have entered in several projects.
  • It’s a bit of complex issue, the same complex issue is faced by even the Chinese and so does the World Bank and ADB, their projects are not running anywhere.
  • Nepal is a very difficult country because it has not yet embraced fully the idea of development.
  • Nepal is a changing society with about 25 percent of the Nepalese population overseas, whether working in the Gulf or in the USA or in Europe, the ideas and aspirations of the country are changing, but its politics continues to be kind of rooted in an era which is sort of bygone.
  • There are number of sets of issues which need to be always overcome and in that sense Nepal is quite different even from other countries in South Asia including Afghanistan or Bangladesh or Sri Lanka, whether the exposure to globalization is longer and older.
  • We need to collaborate both in terms of financial element, the technological and the managerial aspects which are required.

Shakti Sinha, Director, Delhi School of Public Policy & Governance 

  • India needs to ramp up its capacities to do better projects by doing preparatory work.
  • One good thing in the last 3 to 4 months, while there have been a lot of strong statements coming out of Kathmandu, Delhi has extremely restrained its behaviour.
  • Nepal also knows that, in the long run they have to live with India. There is not any serious Chinese project in Nepal.
  • India has to proactively move on a number of these projects including sorting out Pancheshwar multi-purpose project on Mahakali river.
  • 70 percent of the Nepalese exports come to India, even if it become 100 percent, the trade deficit won’t change because Nepal is importing petroleum, machinery and steel from India.

Prof. Tej Pratap Singh, International Politics, BHU

  • There is integrated market on the border and the border is open, so the local people and the local community don’t feel that what is India and what is Nepal.
  • India is the largest trading partner of the Nepal. In 2018-19, they had $ 8.27 billion bilateral trade and these are the largest trade of Nepal with any country.
  • The trade imbalance is in favour of India and this issue has to be addressed by the Government of India and Nepal together, because Indian export to Nepal was $ 7.7 billion and this trade surplus is hugely in favour of India. Because this kind of imbalance trade cannot continue in the future as we are having the problem with China.
  • The next issue is issue of remittances, India has 8 million Nepalese living and working in India and on the other side we have 6, 00,000 Indians living and working in Nepal. So, remittances are going from Nepal to India and India to Nepal, so remittances are another issue that’s binding two economy and two nations together.
  • For energy need, Nepal is dependent upon India and both are dependent on each other, right now India is exporting but in the future India may import from Nepal, when they will have surplus power production.
  • India is largest investor in Nepal in Energy sector, more than 30 percent of FDI in Nepal is coming from India, and more than 150 Indian companies are working in Nepal.


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