India Keenly Watches Nepal Developments: Trade, Investment, Regional Stability At Risk

India shares a civilisational connection with the Himalayan nation and the intense civil unrest could have far reaching implications on the bilateral relations especially linked to the economy.

Economic and trade engagements between the two neighbours have mostly remained static. According to official statistics, the total trade between the two nations was US$ 8536.35 million in 2024-25.

Nepal’s Dependence On India

Over the past several decades, despite China’s increasing engagements with Nepal and even meddling with its internal policy frame, India continues to be the Himalayan nation’s largest trade partner and its largest source of foreign investments.

India also provides transit for almost the entire third country trade of the landlocked Nepal and accounts for about two-third of its merchandise trade. New Delhi also holds a similar share in trade in services, foreign direct investments and almost 100 per cent of petroleum supplies. Another major contributor to Nepal’s economy is remittances on account of pensioners, professionals and workers working in India.

Importantly, it is the only country which accepts the Indian currency – rupee.

Several important steps to boost the trade between the two nations have been taken over the past years, including interoperability of UPI (Unified Payments Interface) and FonePay QR in Nepal, the agreement on long-term power trade.

“India has always been a trusted friend of Nepal and has never been transactional. We share the same heritage and value systems. We stand with the people in Nepal in this moment of despair. For now, one will have to wait and watch the developments as we equally urge all stakeholders to exercise maximum restraint. If required and asked for any assistance, India should be the first responder during any crisis and ready for any call for humanitarian emergencies,” said Navita Srikant, Geopolitical and Security Analyst.

Close Watch On Investments

With destruction of public infrastructure and the resignation of Prime Minister KP Sharma Oli and an imminent leadership change, New Delhi is keeping a close watch on developments in Kathmandu. Securing trade routes will also be critical for transporting fuel and other vital commodities.

India’s total foreign direct investment in Nepal is worth nearly US$ 755.12 million (as on Mid July 2023). Moreover, 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. Violence and continued unrest could severely damage these and New Delhi needs to secure these at the earliest.  

Engagement With Leadership

With PM Oli stepping down, New Delhi is keenly watching a possible change in leadership in the Himalayan nation. It is being touted that Kathmandu’s young mayor, Balendra Shah, may take over.  Popularly known as “Balen,” the 35-year-old is a rapper-turned-politician who has emerged as a face of youth protests in the nation.

India’s engagement with Nepalese leadership including President Ram Chandra Poudel, Army Chief General Ashok Raj Sigdel, and more importantly the leadership emerging after these protests, should prioritize trade continuity, political and social stability in the nation.

How New Delhi navigates this volatile phase is expected to shape the future of the South Asian region, which has already seen violent protests and a regime change in Bangladesh as well.

Moreover, any perception building by adversaries against India during these trying times in Nepal would also need to be countered effectively.