Modern day India and Nepal initiated their relationship with the 1950 Indo-Nepal Treaty of Peace and Friendship and accompanying secret letters that defined security relations between the two countries, and an agreement governing both bilateral trade and trade transiting Indian soil. The 1950 treaty and letters exchanged between the then Indian government and Rana rulers of Nepal, stated that "neither government shall tolerate any threat to the security of the other by a foreign aggressor" and obligated both sides "to inform each other of any serious friction or misunderstanding with any neighboring state likely to cause any breach in the friendly relations subsisting between the two governments." These accords cemented a "special relationship" between India and Nepal that granted Nepalese the same economic and educational opportunities as Indian citizens in India and preferential treatment to Indians compared to other nationalities in Nepal. The Indo-Nepal border is open; Nepalese and Indian nationals may move freely across the border without passports or visas and may live and work in either country. Indians, however, aren't allowed to own land-properties or work in government institutions in Nepal while there are no such restrictions (except in some states) and some civil services (the IFS, IAS, and IPS) for Nepalese nationals in India.
Independent political history
In the 1950s, the Rana rulers of Nepal welcomed close relations with India. Rana rule in Nepal however collapsed within 3 months of signing the PFT. As the number of Indians living and working in Nepal's Terai region increased and the involvement of India in Nepal's politics deepened in the 1960s and after, so too did Nepal's discomfort with the special relationship. India's influence over Nepal increased throughout the 1950s. The Citizenship Act of 1952 allowed Indians to immigrate to Nepal and acquire Nepalese citizenship with ease—a source of some resentment in Nepal. And, Nepalese were allowed to migrate freely to India—a source of resentment there. (This policy was not changed until 1962 when several restrictive clauses were added to the Nepalese constitution.) Also in 1952, an Indian military mission was established in Nepal. In 1954 a memorandum provided for the joint coordination of foreign policy, and Indian security posts were established in Nepal's northern frontier. At the same time, Nepal's dissatisfaction with India's growing influence began to emerge, and overtures to China were initiated as a counterweight to India.
Following the 1962 Sino-Indian border war, the relationship between Kathmandu and New Delhi thawed significantly. India suspended its support to India-based Nepalese opposition forces. Nepal extracted several concessions, including transit rights with other countries through India and access to Indian markets. In exchange, through a secret accord concluded in 1965, similar to an arrangement that had been suspended in 1963, India won a monopoly on arms sales to Nepal.
In 1969 relations again became stressful as Nepal challenged the existing mutual security arrangement and asked that the Indian security checkposts and liaison group be withdrawn. Resentment also was expressed against the Treaty of Peace and Friendship of 1950. India grudgingly withdrew its military checkposts and liaison group, although the treaty was not abrogated.
Tensions came to a head in the mid-1970s, when Nepal pressed for substantial changes in the trade and transit treaty and openly criticized Sikkim's 1975 annexation by India. In 1975 King Birendra Bir Bikram Shah Dev proposed Nepal to be recognized internationally as a 'Zone of Peace' where military competition would be off limits; he received support from China and Pakistan. In New Delhi's view, if the king's proposal did not contradict the 1950 treaty that the-then Indian government had signed with the Rana rulers of Nepal, it was unnecessary; if it was a repudiation of the special relationship, it represented a possible threat to India's security and could not be endorsed. In 1984 Nepal repeated the proposal, but there was no reaction from India. Nepal continually promoted the proposal in international forums and by 1990 it had won the support of 112 countries including the USA, the UK, and France.
In 1978 after Nepal's recognition of Sikkim as an Indian state, India agreed to separate trade and transit treaties, satisfying a long-term Nepalese demand. However, much to the annoyance of Nepalese government India continued to support the Nepalese opposition and refused to endorse Nepal as a Zone of Peace. In 1987 India urged expulsion of Nepalese settlers from neighboring Indian states, and Nepal retaliated by introducing a work permit system for Indians working in Nepal. In 1988, when the two treaties were up for renewal, Nepal's refusal to accommodate India's wishes on the transit treaty caused India to call for a single trade and transit treaty. Thereafter, Nepal took a hard-line position that led to a serious crisis in India–Nepal relations. Nepalese leaders asserted the position that as per the UN charter transit privileges were "a fundamental and a permanent right of a land-locked country" and thus India's demand for a single treaty was unacceptable. So, after two extensions, the two treaties expired on 23 March 1989, resulting in a virtual Indian economic blockade of Nepal that lasted until late April 1990. As time passed Indian economic sanctions over Nepal steadily widened. For example, preferential customs and transit duties on Nepalese goods entering or passing through India (whether imports or exports) were discontinued. Thereafter India let agreements relating to oil processing and warehouse space in Calcutta for goods destined to Nepal expire. Aside from these sanctions, India cancelled all trade credits it had previously extended to Nepal on a routine basis.
To withstand the renewed Indian pressure, Nepal undertook a major diplomatic initiative to present its case on trade and transit matters to the world community. The relationship with India was further strained in 1989 when Nepal decoupled its rupee from the Indian rupee which previously had circulated freely in Nepal. India retaliated by denying port facilities in Calcutta to Nepal, thereby preventing delivery of oil supplies from Singapore and other sources. In Enayetur Rahim's view, "the economic consequences of the dispute... were enormous. Nepal's GDP growth rate plummeted from 9.7% in 1988 to 1.5% in 1989. This had a lot to do with the decreased availability of goods. Shortly after the imposition of sanctions, Nepal experienced serious deficiencies of important goods such as coal, fuel, oil, medicine and spare parts. Nepal also suffered economically from higher tariffs, the closure of border points and the tense political atmosphere. From one of the most thriving economies in Asia, Nepal was now quickly finding itself in the league of World's poorest nation." Although economic issues were a major factor in the two countries' confrontation, Indian dissatisfaction with Nepal's decision to impose work permits over Indians living in Nepal and 1988 acquisition of Chinese weaponry played an important role. India linked security with economic relations and insisted on reviewing India–Nepal relations as a whole. Nepalese King Birendra had to back down after worsening economic conditions led to a change in Nepal's political system, in which the king was forced to institute a parliamentary democracy. The new government sought quick restoration of amicable relations with India.
The special security relationship between New Delhi and Kathmandu was reestablished during the June 1990 New Delhi meeting of Nepal's prime minister Krishna Prasad Bhattarai and Indian prime minister V.P. Singh, after India ended its 13 month long economic blockade of Nepal. During the December 1991 visit to India by Nepalese prime minister Girija Prasad Koirala, the two countries signed new, separate trade and transit treaties and other economic agreements designed to accord Nepal additional economic benefits.
Indian-Nepali relations appeared to be undergoing still more reassessment when Nepal's prime minister Man Mohan Adhikary visited New Delhi in April 1995 and insisted on a major review of the 1950 peace and friendship treaty. In the face of benign statements by his Indian hosts relating to the treaty, Adhikary sought greater economic independence for his landlocked nation while simultaneously striving to improve ties with China.
In June 1990, a joint Kathmandu-New Delhi communique was issued pending the finalization of a comprehensive arrangement covering all aspects of bilateral relations, restoring trade relations, reopening transit routes for Nepal's imports, and formalizing respect of each other's security concerns. Essentially, the communiqué announced the restoration of the status quo ante and the reopening of all border points, and Nepal agreed to various concessions regarding India's commercial privileges. Kathmandu also announced that lower cost was the decisive factor in its purchasing arms and personnel carriers from China and that Nepal was advising China to withhold delivery of the last shipment.
In 2005, after King Gyanendra took over, Nepalese relations with India soured. However, even after the restoration of democracy, in 2008, Prachanda, the Prime Minister of Nepal, visited India, in September 2008 only after visiting China, breaking the long held tradition of Nepalese PM making India as their first port-of-call. When in India, he spoke about a new dawn, in the bilateral relations, between the two countries. He said, "I am going back to Nepal as a satisfied person. I will tell Nepali citizens back home that a new era has dawned. Time has come to effect a revolutionary change in bilateral relations. On behalf of the new government, I assure you that we are committed to make a fresh start."
In 2008, Indo-Nepal ties got a further boost with an agreement to resume water talks after a 4 year hiatus. The Nepalese Water Resources Secretary Shanker Prasad Koirala said the Nepal-India Joint Committee on Water Resources meet decided to start the reconstruction of breached Koshi embankment after the water level goes down. During the Nepal PM's visit to New Delhi in September the two Prime Ministers expressed satisfaction at the age-old close, cordial and extensive relationships between their states and expressed their support and co-operation to further consolidate the relationship.
The two issued a 22-point statement highlighting the need to review, adjust and update the 1950 Treaty of Peace and Friendship, amongst other agreements. India would also provide a credit line of up to 150 crore rupees to Nepal to ensure uninterrupted supplies of petroleum products, as well as lift bans on the export of rice, wheat, maize, sugar and sucrose for quantities agreed to with Nepal. India would also provide 20 crore as immediate flood relief.
In return, Nepal will take measures for the "promotion of investor friendly, enabling business environment to encourage Indian investments in Nepal."
In 2010 India extended a Line of credit worth US$50 million & 80,000 tonnes of foodgrains. Furthermore, a three-tier mechanism at the level of ministerial, secretary and technical levels will be built to push forward discussions on the development of water resources between the two sides. Politically, India acknowledged a willingness to promote efforts towards peace in Nepal. Indian External affairs minister Pranab Mukherjee promised the Nepali Prime Minister Prachanda that he would "extend all possible help for peace and development."
However, in recent years, the increasing dominance of Maoism in Nepal's domestic politics, along with the strengthening economic and political influence of the People's Republic of China has caused the Nepalese government to gradually distance its ties with India. Prime Minister of India Narendra Modi visited Nepal in August marking the first official visit by an Indian prime minister in 17 years, provided Nepal with NRs 10,000 crore ($1 billion) as concessional line of credit for various development purposes to Nepal and a HIT formula, but he insisted that Indian immigrants in Nepal don't pose a threat to Nepal's sovereignty and therefore open border between Nepal and India should be a bridge and not a barrier. Nepal and India also signed a deal on 25 November 2014 to build a $1-billion hydropower plant as Indian premier Narendra Modi began a visit to Nepal.
The Territorial disputes of India and Nepal include Kalapani and Susta. Nepal claims that the river to the west of Kalapani is the main Kali river, hence it belongs to Nepal. But India insists that the river to the east of Kalapani is the main Kali river, and therefore claim the Kalapani area belongs to India. The river borders the Nepalese zone of Mahakali and the Indian state of Uttarakhand. The Sugauli Treaty signed by Nepal and British India in 4 March 1816 locates the Kali River as Nepal's western boundary with India. Subsequent maps drawn by British surveyors show the source of the boundary river at different places. This discrepancy in locating the source of the river led to boundary disputes between India and Nepal, with each country producing maps supporting their own claims. The Kali River runs through an area that includes a disputed area of about 400 km² around the source of the river although the exact size of the disputed area varies from source to source. The dispute intensified in 1997 as the Nepali parliament considered a treaty on hydro-electric development of the river. India and Nepal differ as to which stream constitutes the source of the river. Nepal regards the Limpiyadhura as the source; India claims the Lipu Lekh. Nepal has reportedly tabled an 1856 map from the British India Office to support its position. Kalapani has been occupied by India's Indo-Tibetan border security forces since the Sino-Indian War with China in 1962. Nepal has called for the withdrawal of the Indian border forces from Kalapani area.
As the first step for demarcating Indo-Nepal border, survey teams from both countries will locate and identify missing pillars along the border and construct new pillars. According to the Nepalese government estimates, of the 8000 boundary pillars along the border, 1,240 pillars are missing, 2,500 require restoration and 400 more need to be constructed. The team will conduct survey of the border pillars based on the strip maps prepared by the Joint Technical Level Nepal-India Boundary Committee (JTLNIBC). The JTLNIBC was set up in 1981 to demarcate the India-Nepal border and after years of surveying, deliberations and extensions, the Committee had delineated 98 per cent of the India-Nepal boundary, excluding Kalapani and Susta, on 182 strip maps which was finally submitted in 2007 for ratification by both the countries. Unfortunately neither country ratified the maps. Nepal maintained that it cannot ratify the maps without the resolution of outstanding boundary disputes, i.e. Kalapani and Susta. India, on the other hand, awaited Nepal’s ratification while at the same time urging it to endorse the maps as a confidence building measure for solving the Kalapani and Susta disputes. In absence of a ratification, the process of demarcating the India-Nepal boundary could not be undertaken.
Nepal’s trade deficit with India has surged in recent years with continuously rising imports and sluggish exports. Bilateral trade was US$4.21 billion during the fiscal year 2010-11 (July 16 – July 15). Nepal’s import from India amounted to US$3.62 billion and exports to India was US$599.7 million. In the first six months of fiscal year 2011-12, Nepal’s total trade with India was about US$1.93 billion; Nepal’s exports to India were about US$284.8 million; and imports from India were about US$1.64 billion.
Nepal’s main imports from India are petroleum products (28.6%), motor vehicles and spare parts (7.8%), M. S. billet (7%), medicines (3.7%), other machinery and spares (3.4%), coldrolled sheet in coil (3.1%), electrical equipment (2.7%), hotrolled sheet in coil (2%), M. S. wires, roads, coils and bars (1.9%), cement (1.5%), agriculture equipment and parts (1.2%), chemical fertilizer (1.1%), chemicals (1.1%) and thread (1%). Nepal’s export basket to India mainly comprises jute goods (9.2%), zinc sheet (8.9%),textiles (8.6%),threads (7.7%), polyster yarn (6%), juice (5.4%), catechue (4.4%), Cardamom (4.4%), wire (3.7%), tooth paste (2.2%) and M. S. Pipe (2.1%).
Human trafficking in Nepal is a serious concern. An estimated 100,000-200,000 Nepalese in India are believed to have been trafficked. Sex trafficking is particularly rampant within Nepal and to India, with as many as 5,000-10,000 women and girls trafficked to India alone each year. The seriousness of trafficking of Nepalese girls to India was highlighted by CNN Freedom Project's documentary: Nepal's Stolen Children which caused an outrage among Nepalese. Maiti Nepal has rescued more than 12,000 stolen Nepalese children from sex trafficking since 1993.
- Nepali Indians
- Nepalese people of Indian ancestry
- Foreign relations of Nepal
- Foreign relations of India
- India-Nepal water talks resume after four years
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- Indo Nepal Border Concept : A public view : A broader scope