On the second day of his US visit, Prime Minister Narendra Modi held a bilateral meeting with his Nepalese counterpart KP Sharma Oli in New York on Sunday (local time). This marks the first formal meeting between the two leaders since Oli became Nepal’s Prime Minister for the fourth time in July 2024, following his predecessor Pushpa Kamal Dahal's loss of confidence in the Parliament.

The meeting was a significant step toward reaffirming the strong ties between India and Nepal, with both sides expected to take concrete measures to strengthen bilateral relations across multiple sectors, particularly in trade, infrastructure development, and connectivity.

Speaking after the meeting, KP Sharma Oli stated that the meeting was “very good” and emphasized that the discussions would contribute to enhancing India-Nepal ties. Prime Minister Modi had earlier extended congratulations to Oli on his appointment as the Nepalese Prime Minister, expressing eagerness to work closely for the progress and prosperity of both nations.

India-Nepal Relations: A Long-Standing Bond

India and Nepal share a deep historical, cultural, and economic connection. Since May 2014, there have been 17 high-level exchanges between the leaders of both nations, including five visits by PM Modi to Nepal and ten visits by Nepalese Prime Ministers to India. PM Modi's most recent visit to Nepal was in May 2022, when he visited Lumbini on Buddha Purnima.

India continues to be Nepal’s largest trade partner, receiving 67.9% of Nepal’s total exports. Nepal’s main exports to India include edible oil, coffee, tea, and jute, while the country imports petroleum products, iron and steel, vehicles, cereals, and machinery parts from India. Indian firms account for 33.5% of Nepal’s total Foreign Direct Investment (FDI), amounting to nearly $670 million.

The economic cooperation between the two countries has strengthened over the years, with Indian investments playing a pivotal role in Nepal’s development. This bilateral engagement is vital not just for economic growth but also for regional stability.

Oli's Stance on India and Regional Issues

Despite the pro-Beijing stance that KP Sharma Oli has held in the past, particularly regarding territorial disputes with India, the Nepalese Prime Minister now seems to be focusing on enhancing connectivity with India. In 2019, Oli made a controversial claim that areas such as Lipulekh, Kalapani, and Limpiyadhura are part of Nepalese territory, sparking tensions with India. However, he has since softened his rhetoric, recently calling for increased collaboration with India in sectors like transportation and trade.

During a recent progress review meeting in Nepal, Oli highlighted the importance of developing waterway and railway connectivity with India. He expressed his desire to expand waterway transport between Hanumannagar (near the Indian border) and Triveni and Devghat, considering it a cost-effective method for the movement of goods and people. Oli also emphasized the need to enhance railway connectivity by adding new lines to the existing Janakpur-Kurtha railway, improving cross-border transportation with India.

These efforts to strengthen infrastructure align with India’s broader regional connectivity initiatives, which aim to improve trade routes and facilitate smoother transportation across borders. By boosting land and water transport links, both nations hope to enhance trade, improve people-to-people exchanges, and contribute to regional economic development.

Strategic Shifts and Connectivity Projects

Oli’s recent shift in focus toward developing infrastructure with India marks a potential turning point in India-Nepal relations. The two countries are expected to collaborate closely on key transport infrastructure projects, which could further deepen economic ties. The development of waterways and railway lines could be particularly beneficial for both countries, reducing transportation costs and boosting regional trade.

In particular, Oli's emphasis on waterways as a cost-effective mode of transport signals his intent to improve cross-border logistics. He has directed civil servants to draft plans for operating steamer services from Hanumannagar to Devghat, which could significantly enhance the movement of goods between India and Nepal.

This infrastructure push is part of a larger effort by Nepal to strengthen its economic ties with India, especially given the country’s strategic position between India and China. By enhancing transport routes and facilitating easier trade, Nepal aims to position itself as a key player in regional connectivity, and India remains its most critical partner in this effort.

Challenges Ahead

Despite these positive developments, there are challenges to overcome, particularly concerning border disputes and Oli’s past ties with Beijing. His earlier pro-China stance has raised concerns in New Delhi, especially in light of territorial disputes like the Lipulekh-Kalapani issue. However, the recent emphasis on enhancing India-Nepal connectivity suggests that both leaders are working toward mending strained relations and finding common ground on issues of mutual interest.

The bilateral meeting between PM Modi and KP Sharma Oli is a significant step toward this end, setting the stage for further cooperation in trade, transport, and economic development. As India continues to invest in Nepal’s infrastructure and economic growth, the two countries are expected to forge even stronger bonds in the years to come.

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