Nepal and India share a centuries-old trade relationship, with India being Nepal’s biggest trading partner and a major source of foreign investment. While increasing political unrest and violence spread fear over the Himalayan nation, fears are growing for the safety of India’s huge investments, especially in the energy and infrastructure sectors.
As per the Nepal Rastra Bank, India’s foreign direct investment in Nepal totaled around USD 755.12 million through July 2023, which amounts to around 35% of the foreign investment Nepal has attracted in total. More than 150 Indian businesses operate in Nepal, ranging from manufacturing and services to energy and tourism.
Key Indian Investments And Projects At Risk
Indian investment and firms have played a central role in the economic progress of Nepal, catalysing industrialisation, employment generation, and state income. The energy sector is a primary target of Indian investment, with some high-value hydropower and transmission line projects being carried out presently.
Arun-3 Hydropower Project: The 900 MW project being constructed by India’s state-run Satluj Jal Vidyut Nigam (SJVN) is one of the pillars of this partnership worth Rs 58 billion. It is slated to be ready by 2026.
Upper Karnali Hydropower Project: India’s private sector firm GMR is developing this 900 MW project worth Rs 13 billion.
Lower Arun Hydropower Project: Yet another high-value project of SJVN, the 669 MW power plant is being built at an investment of ₹9 billion.
Cross-Border Transmission Lines: Indian business houses have invested Rs 5 to Rs 9 billion in cross-border transmission lines, including the key Muzaffarpur-Dhalkebar 400 kV line.
The Indian government has also committed to purchasing up to 10,000 MW of hydroelectricity from Nepal over the next decade. A recent study suggests that if electricity exports are effectively increased, Nepal’s GDP could grow to Rs 13,100 billion by 2045.
Other Major Infrastructure And Trade Projects
Apart from the energy sector, India has extended four lines of credit to the Nepal government worth USD 1.65 billion. These are funding 45 road works and six other projects involving hydropower and transmission line works throughout the nation.
The Motihari-Amlekhgunj Oil Pipeline is another important project in its final stage of completion. It is meant to substitute the dangerous, truck-dominated mode of petroleum supply from India, Nepal’s one and only petroleum product provider.
Bilateral Trade And Strategic Issues
India is Nepal’s biggest trading partner. India exported goods to Nepal worth USD 7,040.98 billion during the 2023-24 fiscal year, whereas imports from Nepal were USD 831 billion, leaving a trade surplus in favour of India.
Nevertheless, the increasing militancy and political turbulence in Nepal are a new challenge for India in the diplomatic realm. Experts predict that if it continues to worsen, not only would India’s multi-billion-dollar projects become vulnerable, but it could also bring a lot of strain to the strategic relationship between the two countries. The security of Indian investments and the continuity of these vital projects are now the top concern of both the governments.
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