India-Nepal Ties: A strong bilateral partnership amid China’s looming presence

India’s assistance flows broadly from the July 1950 India-Nepal Treaty of Peace and Friendship and the priority India accords to Nepal under its Neighborhood First policy.

By Vinay Jha 

Recently, a solemn ceremony in Kathmandu marked 10 years of the devastating earthquake that struck Nepal in April 2015, prompting India to launch what has been described as its largest disaster relief operation abroad. The period has seen a large number of India-assisted reconstruction projects across the worst-affected districts of the country.

India’s assistance flows broadly from the July 1950 India-Nepal Treaty of Peace and Friendship and the priority India accords to Nepal under its Neighborhood First policy. More specifically, it is an outcome of India’s June 2015 pledge of $1 billion to assist Nepal with post-earthquake reconstruction. Of this, $250 million was in the form of grant assistance for the housing, health, education, and cultural heritage sectors; $750 million was earmarked for a concessional Line of Credit (LoC).

Barely a month goes by without the inauguration or laying of a foundation stone for new projects for a school, hospital, or health center. Significantly, 2023 also marked 20 years of India’s participation in High Impact Community Development Projects in Nepal, which cover priority areas like hospitals, schools, colleges, drinking water facilities, and sanitation.

Both continue in the backdrop of India’s larger development partnership with Nepal, which covers hydroelectricity, road and rail connectivity, infrastructure development, and technological cooperation.

The past 10 years have, however, also seen some ups and downs when it comes to the India-Nepal relationship. There has been a distinct sense of unease in New Delhi over China’s influence on Nepal in recent years, as the traditionally warm and friendly ties between the two nations have oscillated quite unpredictably between periods of perfect neighbourly bonhomie and spells of cold, uneasy coexistence.

One of the reasons for the Chinese influence on Nepal has purely to do with history and geography – Nepal, after all, shares an over 1,400-km long border with China’s Tibet Autonomous Region to its north. The other factor, and a worrying one from India’s point of view, is that several Nepalese Prime Ministers have sought to exhibit close ties with China in a bid to highlight equidistance when it comes to their relationship with New Delhi and Beijing, largely to satisfy demands and quell criticism from various quarters within Nepal.

The mood was upbeat when Prime Minister Narendra Modi visited Nepal in August 2014 on the first Prime Minister-level bilateral visit in 17 years, and again in November 2014 for the SAARC Summit. But 2015 witnessed a chill in bilateral ties after the blockade of a major transit route between India and Nepal. This lasted nearly four-and-a-half months and had a near-crippling effect on the Himalayan nation’s economy. Some political leaders and analysts in Kathmandu described it as an “unofficial economic blockade” by India.

New Delhi maintained that there was no blockade by India of supplies going to Nepal. Obstructions were "by the Nepalese population on the Nepalese side," External Affairs Minister Sushma Swaraj stated in the Rajya Sabha on December 3, 2015, in reference to the violence and disruption of a major trans-border road route during protests by the Madheshis (people of Indian origin in Nepal’s Terai region) against the country’s new Constitution.

A few years later, during KP Sharma Oli’s earlier tenure as Prime Minister from 2018 to 2021 – a term during which he gained the reputation of being pro-China – Nepal’s government approved a new map showing Kalapani, Lipulekh, and Limpiyadhura as part of its territory. This led to friction, with New Delhi reiterating that Kalapani – located in the eastern corner of Uttarakhand’s Pithoragarh district – is Indian territory.

Another irritant in bilateral ties is Nepal’s participation in China’s Belt and Road Initiative (BRI). India has been a vocal critic of BRI projects, particularly when it comes to their implications for India’s sovereignty, territorial integrity, and security. It has also consistently protested to the Chinese side over the ‘China-Pakistan Economic Corridor’ (CPEC), saying it passes through parts of the Indian Union Territories of Ladakh and Jammu & Kashmir, which are under the illegal occupation of Pakistan.

It is in the backdrop of off-and-on spells of strain in bilateral ties that India’s strong development partnership with Nepal assumes greater significance. India-assisted projects aimed at improving the lives of the people of Nepal have seen continuity through successive leaderships and governments in the Himalayan nation. That these are primarily aimed at addressing pressing needs at the ground level has helped generate a degree of goodwill for India.

At the same time, bilateral cooperation in the power and infrastructure sectors, including joint hydel power generation and transmission projects in addition to rail connectivity initiatives, has also been growing steadily.

Last month, a meeting between Indian Prime Minister Narendra Modi and Prime Minister Oli on the sidelines of the BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) Summit in Bangkok, Thailand, on April 4, 2025, appeared to convey the message that the bilateral relationship was on track.

According to India’s Ministry of External Affairs (MEA), the two leaders reviewed “the unique and close relationship” between India and Nepal. They expressed satisfaction at the progress in enhancing physical and digital connectivity, people-to-people linkages, and in the domain of energy. They agreed to continue working towards further deepening the multifaceted partnership between our two countries and peoples, the MEA stated.

Given the spells of trust deficit between the two nations over the years, it remains to be seen what the meeting between the two Prime Ministers leads to in the coming weeks and months. In the meantime, it is the multi-pronged and robust India-Nepal Development Partnership that will continue to bind the two nations, and their people, together.

(Vinay Jha is a senior journalist.) 

Views are personal, and do not represent the stand of this publication.