About Commerce Wing

1. Commerce Wing deals with various aspects of economic and commercial engagement between India and Nepal, including areas such as:

i.    Trade, transit and investments. 
ii.    Water resources sector and power sector. 
iii.    Civil aviation and tourism sectors. 
iv.    Monitoring the implementation of infrastructure projects financed by Government of India’s Lines of Credit (through EXIM Bank of India).

Commercial and Economic Relations:

2. India is Nepal's largest trade partner and the largest source of foreign investment, besides providing transit to Nepal for trade with other countries. Trade with India accounts for about two-third of Nepal’s overall external merchandise trade. In context of services, trade with India constitutes about one-third of Nepal’s overall trade in services. India is the source for one-third of Nepal’s foreign direct investments, almost 100% of its petroleum supplies, and significant share of inward remittances on account of pensioners, professionals and workers working in India.

Bilateral Framework for Trade and Transit

3. The bilateral framework for trade is anchored by the India-Nepal Treaty of Trade, and the Agreement of Co-operation to Control Unauthorized Trade - 2009. These were automatically renewed in October 2023. The Trade Treaty allows Nepal unilateral duty-free access to the Indian market.

4. India and Nepal also have a Treaty of Transit, which confers transit rights through each other’s territory through mutually agreed routes and modalities. Its revised version was signed on 1 June 2023 for a period of 7 years, which will then will be automatically renewed for further period of 7 years..

5. The India-Nepal Rail Services Agreement (RSA) 2004 governs the rail-freight transport between the two countries. A Letter of Exchange (LoE) to the RSA was signed in June 2021 to liberalize India-Nepal rail-freight traffic and bring it in line with latest operational and infrastructure status of Indian and Nepali Railways. The LoE has increased efficiency and cost-competitiveness, eventually benefiting Nepalese traders, transporters and consumers. At present, there are two rail freight routes from India to Nepal viz. the Raxaul – Birgunj ICD line and the Jogbani- Nepal Customs Yard.

6.Merchandise trade with India comprises about 62.3% of total trade of Nepal. In FY 2025-26, both countries carried out merchandise trade worth about US$ 9.38 billion. In the Nepali FY 2024-25, India was Nepal’s largest export destination, receiving 81.1% of Nepal’s total exports. Nepal’s other export destination are the United States, Germany, UK, China, UAE, France, Australia, Japan, Italy and Canada. Nepal’s exports mainly constitute cardamom, rolled iron sheets, edible oil, juices, plywood and jute.

[Source: Nepal Rastra Bank and Ministry of Commerce and Industry, Govt of India]

7.Nepal was India’s 12th largest export destination in 2025-26. Main exports from India to Nepal are petroleum, iron & steel, automobiles, machinery, cereals, etc. Open border and connectivity projects have been major facilitators of increased India-Nepal trade. 

[Source: Ministry of Commerce and Industry, Govt of India]

8. India-Nepal merchandise trade statistics over the past few years are given below.

Indian Financial Year (April to March) Figures in US$ million

9. Open borders and connectivity projects have helped strengthen the engagement between India-Nepal in the area of trade. Government of India is providing assistance for development of cross-border trade-related infrastructure. It includes upgradation of major Land Customs Stations (LCS) to Integrated Check Posts (ICPs) of international standards; upgrading approach highways to the border on the Indian side; upgrading and expanding the road network in the Terai region of Nepal; and, extending rail links to Nepal. Integrated Check Posts at Birgunj, Nepalgunj and Biratnagar are fully functional. An ICP in Bhairahawa (Nepal) are under construction while preparatory work for the construction of the ICP in Dodhara Chandani in Nepal is underway.

10. Both nations continue to make further strides in enhancing digital connectivity. An MoU between Digital India Bhashini and Kathmandu University for co-creating National Digital Infrastructure for “Voice First” Language Translation platform was signed during the visit of Foreign Minister of Nepal to India in June 2026. Both Ministers also launched the Peer-to-Peer (P2P) linkage between Unified Payments Interface (UPI) of India and National Payments Interface (NPI) of Nepal for facilitating cross-border personal remittances between the two countries.

11. An Inter-Governmental Committee (IGC) meeting on trade, transit and cooperation to control unauthorized trade between India and Nepal led at Secretary-level, is held on regular intervals. It is a platform to discuss and resolve issues relating to bilateral trade, transit facilities provided by India to Nepal, investment promotion, improvement of infrastructure at Land Customs Stations, and Indian investments in Nepal etc. The Inter-Governmental Sub-Committee (IGSC), which is led at the Joint Secretary-level, is also held regularly and usually precedes the IGC. The last meetings of the IGSC and IGC were held in Kathmandu on 10-11 January 2025 and 12-13 January 2024, respectively.

Transit of Nepal’s trade with other countries

12. Transit of goods related to Nepal’s trade with other countries, is routed through the ports of Kolkata/Haldia and Vishakapatnam. In addition, Nepal’s trade with Bhutan and Bangladesh also transits through India. A Letter of Exchange on the Operationalisation of Vishakhapatnam Port (Amendment in the Treaty of Transit) for traffic-in-transit between Vishakhapatnam Port and Nepal was signed in February 2016 during the visit of Prime Minister of Nepal to India. Commensurate amendments in the Railway Services Agreement were also made. Since then, it has facilitated movement of transit traffic between Vishakapatnam Port and Nepal (ICD Birgunj) apart from providing additional transit facilities. The revised Treaty of Transit signed in June 2023 allows Nepal’s merchandise to move seamlessly through India’s road, railway, inland waterways and ports networks.

13.When most borders around the world remained closed during the pandemic, trade routes between India-Nepal trade continued to be open and robust. In fact, after an initial slowdown in April 2020, trade flows between India and Nepal quickly picked up, and displayed rising trends.

Indian Investments in Nepal 

14. India is the largest source of investment into Nepal, accounting for more than 32.3% of the total FDI stock of Nepal, which is worth nearly USD 809.11 million (by mid-July 2024). There are about 150 Indian ventures operating in Nepal engaged in manufacturing, services (banking, insurance, dry port, education and telecom), power sector and tourism industries. Indian companies and investments have played a key role in Nepal’s national economic journey by contributing to industrialization, employment generation, government revenue and export earnings.
[Source: Nepal Rastra Bank]

Water Resources Sector

15. Cooperation in water resources primarily concerning the common rivers is an important area of cooperation. A large number of small and large rivers flow from Nepal to India. These rivers have the potential to become major sources of irrigation and power for Nepal and India. A three-tier bilateral mechanism established in 2008, to discuss cooperation in water resources, flood management, inundation-control and hydropower development between the two countries, has been working well.

16 The Kosi Agreement (signed in 1954 and revised in 1966) and Gandak Agreement (signed in 1959 and revised in 1964) represent the first major agreements on India-Nepal cooperation in water resources sector. These were aimed at flood-control, irrigation and power generation for the benefit of both India and Nepal. Last India-Nepal Joint Committee on Kosi and Gandak projects (JCKGP) took place in Kathmandu, Nepal during 30April - 01 May 2026. Another landmark agreement, The Mahakali Treaty signed in 1996 between India and Nepal provides for equitable use of the waters of the Mahakali river for both countries, including through the implementation of the envisaged Pancheshwar Multi-purpose Project which will provide irrigation, flood-control and power to both India and Nepal.

17. As part of bilateral cooperation on flood-management, river training works on Kamala, Bagmati and Lalbakeya rivers were completed under Indian grant-assistance amounting to NRs 4.85 billion (more than INR 300 crores). These works have benefitted several millions of people inhabiting the watersheds of these rivers in India and Nepal. Mutually-agreed emergency works have also been funded by Govt. of India on other rivers to minimize the danger of inundation. Government of India has also been proactive in providing relief material to flood-affected areas in Nepal, constituting yet another area of India-Nepal cooperation in this sector.

18. The last meeting of Joint Committee on Water Resources (JCWR) was held on 23 September 2022. Last meeting of Joint Committee on Inundation and Flood Management (JCIFM) took place in Kathmandu on 13-14 March 2022.

Power Sector Cooperation

19. The Joint Vision Statement on Power Sector Cooperation issued on 2 April 2022 during visit of Prime Minister of Nepal to India, laid out a comprehensive roadmap for bilateral cooperation in the sector. Its key pillars include joint development of power generation projects in Nepal, development of cross-border transmission infrastructure, bi-directional power trade, coordinated operation of the national grids and institutional cooperation in sharing latest operational information, technology and know-how. The Vision Statement acknowledged the role Indian investment can play in Nepal's renewable power sector to benefit both the countries. The Statement also directed concerned officials on both sides to expedite the bilateral discussions towards early finalization of the Pancheshwar Multipurpose project’s DPR. In this regard, cooperation is being taken forward by various bilateral mechanisms.

20.The Power Trade Agreement signed in 2014 established a Joint Steering Committee (JSC) and a Joint Working Group (JWG) at the levels of Secretary and Joint Secretary, respectively. The 12th meeting of these mechanisms took place in New Delhi in January-February 2025, and covered issues related to power trade, building of cross-border transmission lines, upcoming power projects and also prospects for cooperation in renewable energy. The Agreement for Long Term Power Trade signed in 2024 envisages the export of up to 10,000 MW power from Nepal to India over the next decade.

21. In April 2025, an MoU between the Nepal Electricity Authority and the PowerGrid Corporation was signed for the joint development of two new 400 kV cross border transmission lines viz., the Dododhara-Bareilly and Inaruwa-Purnea lines.

22. Power trade is one of the main pillars of India-Nepal power cooperation as envisaged in the Joint Vision Statement issued on 2 April 2022. In February 2021, India issued the Procedure for Approval and Facilitating Import/Export Cross Border of Electricity by the Designated Authority (CBET Procedure), thereby streamlining the regulatory regime and procedure for electricity trade with and through India. In May 2021, Nepal became the first country to benefit from this Procedure when Nepal Electricity Authority entered into an arrangement with NTPC Vidyut Vyapar Nigam Ltd. to buy power in real time from the Indian Energy Exchange..

23. Till 2025 (wet season), a total of about 1150 MW of power export from Nepal to India had been achieved. The start of these exports from Nepal to India under the CBET Procedure marks a crucial milestone in bilateral cooperation and is likely to bring significant economic benefits to both the countries. 

24. An India-Nepal Joint Technical Team (JTT) was constituted in 2014 for preparation of a long-term integrated power transmission plan covering projects up to 2035. The 18th JTT meeting took place in May 2026 at New Delhi. 

25. The Muzaffarpur-Dhalkebar 400 kV line was launched by Prime Ministers of India and Nepal during the latter’s state visit to India in February 2016. The Nepal portion of the 140 km long line was built under an Indian LoC (line of credit) of USD 13.5 million. On 11 November 2020, the line was successfully charged to its full capacity. 

26. During his visit to Nepal in January 2024, EAM inaugurated three 132 kV cross-border transmission lines between India and Nepal, namely, the second circuit of Raxaul-Parwanipur line, the second circuit of Kataiya-Kusaha line, and the New Nautanwa-Mainhiya lines. Ground breaking of the Gorakhpur-Butwal transmission line was carried out on 2 June 2023. This is a 400 kV quad moose line and is the 2nd major cross-border transmission line being built under joint venture between POWERGRID India and NEA Nepal.

27. India has also supported the construction of power transmission lines within Nepal through Lines of Credit funding via the EXIM Bank. These include major projects like the Koshi corridor and the Modi-Lekhnath line & substations which are nearing completion. The 132 KV Solu Corridor project was jointly inaugurated on 2 April 2022. Solu Corridor is a 90 km long, 132 kV Double Circuit power transmission line and substation project, connecting parts of North-Eastern Nepal with the national electricity grid. It is a USD 29 million project financed by Government of India’s Line of Credit, funded by EXIM bank of India.

28. Arun III Project (900 MW) is a flagship project between India and Nepal in the power sector. It is a peaking run-of-river project located on the Arun River in Sankhuwasabha district of of Nepal. It is an export-oriented project and was awarded to India’s SJVN Limited on a Build-Own-Operate-Transfer basis for a period of 30 years including construction period. The foundation stone of the Project was laid in May 2018. Once complete, it will be Nepal’s largest power project.

29. SJVN Ltd. signed a Project Development Agreement with Investment Board of Nepal for the development of Lower Arun HEP (669 MW) to be located downstream of Arun III. On 16 May 2022, during the visit of Prime Minister of India to Nepal, SJVN Ltd signed an MoU with Nepal Electricity Authority for joint development of Arun-4 HEP which would be located upstream of Arun 3 HEP.

30. The 900 MW Upper Karnali HEP was awarded to India’s GMR. The project is currently in pre-construction phase and the developer is undertaking activities related to land acquisition, compensation, financing and power purchase discussions.

31. NHPC and IBN signed an MoU on 18 August 2022 for development of West Seti + SR6 (1200 MW) Hydroelectric Project. NHPC, India and VUCL Ltd, Nepal signed an MoU for the development of 480 MW Phukot-Karnali Hydroelectric Project on 1 June 2023.

Petroleum

32. The Raxaul-Amlekhgunj cross-border petroleum pipeline project is a 41-kilometer pipeline for transportig petroleum products from India to Nepal. The project connects Indian Oil Corporation’s regional depot at Raxaul in India with Nepal’s biggest fuel storage based in Amlekhgunj. It was constructed and funded by the Indian Oil Corporation Ltd., and inaugurated in September 2019. Within a short span of being made operational, the pipeline was able to save Nepal Oil Corporation nearly NRs. 15 crores a month. The pipeline created a record by supplying 100 million liters of diesel to Nepal in a single month in December 2020.It is also South Asia’s first cross-border petroleum products pipeline.

33. An MoU for the construction of petroleum supply infrastructure by laying a new pipeline between Siliguri and Jhapa, extension the existing oil pipeline from Amlekhgunj till Chitwan, as well as construction of two greenfield terminals at Chitwan and Jhapa, was signed on 1st June, 2023. The Phase-II of the Motihari-Amlekhgunj Pipeline in Chitwan has been completed.

Civil Aviation

34. Bilateral cooperation in this sector is governed by the India-Nepal Air Services Agreement which was signed on 16 February 2010 to facilitate air traffic between the two countries. 30,000 seats per week have been allocated to each side in each direction.

Tourism

35. India is the largest source country for tourism into Nepal. A Memorandum of Understanding (MoU) on Cooperation in the field of Tourism was signed between the two Governments on 25 November 2014 in Kathmandu. The MoU aims to deepen and broaden cooperation in the field of tourism and also promote cooperation and direct communication between the stake holders of tourism and hospitality industry for enhancing tourism cooperation and strengthening economic development and employment generation.

Lines of Credit

36. GOI has extended various Lines of Credit (LoCs) to the Government of Nepal amounting to USD 750 million. These LoCs were signed in June 2006, September 2007 and September 2016, for execution of infrastructure development projects as prioritized by Government of Nepal. The 11th India-Nepal LOC Review Meeting took place in New Delhi on 04 December 2025.

37. Projects financed by India’s LoCs include 35 in the roads sector, 6 in hydropower & transmission lines, and several others in housing and reconstruction. Many of these projects are either completed or are nearing completion, including some iconic projects such as the Solu Corridor Transmission Line, Koshi Corridor Transmission Line, Muzaffarpur - Dhalkebar Transmission line, Devighat hydroelectric project etc.