India-Nepal Trade Relations Enhancement

Source: The Hindu 

Introduction 

On November 14, 2025, India and Nepal took a significant step towards enhancing their economic partnership by amending the Treaty of Transit between the two nations. Union Minister of Commerce and Industry Piyush Goyal and Nepal's Minister for Industry, Commerce and Supplies Anil Kumar Jha met in New Delhi to formalize this important diplomatic and economic milestone. 

• This amendment aims to facilitate the movement of rail-based freight between Jogbani in India and Biratnagar in Nepal, including provisions for bulk cargo transportation. The liberalization extends to key transit corridors, marking a new era in India-Nepal trade relations.

What is the Treaty of Transit? 

Definition and Purpose: 

• A Treaty of Transit is an international agreement between two or more countries that governs the passage of goods through their territories. 
• Establishes legal framework for cross-border movement of cargo. 
• Ensures smooth, predictable, and secure transportation of goods between landlocked and coastal nations. 

Historical Context: 

• The Treaty of Transit between India and Nepal has been a cornerstone of bilateral trade relations. 
• Nepal, being a landlocked country, relies heavily on transit facilities through India to access international markets. 
• The treaty provides Nepal with access to Indian ports and facilitates trade with third countries. 

Significance: 

• Promotes regional economic integration. 
• Reduces trade barriers and transportation costs. 
• Strengthens diplomatic and commercial ties between neighbouring countries.

What are the Key Features of the Amendment? 

Rail-Based Freight Liberalization: 

• Primary focus: facilitating rail freight movement between Jogbani (India) and Biratnagar (Nepal). 
• Includes provisions for bulk cargo transportation. 
• Aims to reduce dependence on road transport and improve efficiency. 

Extended Transit Corridors: 

• The amendment specifically liberalizes key transit routes: 

Kolkata-Jogbani Route: 

• Connects Nepal to major Indian port city of Kolkata. 
• Provides Nepal with direct access to maritime trade facilities. 
• Reduces transit time and logistics costs. 

Raxaul-Nautanwa Corridor (Sunauli): 

• Enhances connectivity between northern India and Nepal. 
• Facilitates movement of goods through multiple entry points. 

Visakhapatnam-Nautanwa (Sunauli) Route: 

• Connects Nepal to India's eastern coastal port of Visakhapatnam. 
• Diversifies port access options for Nepali trade. 

Multimodal Trade Connectivity: 

• The amendment strengthens multimodal trade connectivity by integrating rail, road, and port infrastructure. 
• Enables seamless movement of goods across different transportation modes. 
• Improves overall efficiency of supply chains. 

Enhanced Trade with Third Countries: 

• According to government release, the liberalization facilitates Nepal's trade with third countries through Indian transit facilities. 
• Positions India as a crucial trade facilitator for landlocked Nepal. 
• Strengthens India's role in regional trade architecture.

What are the Benefits of this Amendment? 

For Nepal: 

• Improved Market Access: Enhanced connectivity to Indian ports facilitates international trade. 
• Cost Reduction: Rail transport is generally more cost-effective than road transport for bulk cargo. 
• Diversified Routes: Multiple transit corridors reduce dependence on single route and enhance trade security. 
• Economic Growth: Better trade infrastructure supports industrial development and economic expansion. 

For India: 

• Strengthened Regional Influence: Positions India as a reliable partner for regional trade facilitation. 
• Increased Rail Freight Revenue: More cargo movement through Indian railways generates economic benefits. 
• Strategic Partnership: Deepens economic ties with important neighbor. 
• Regional Stability: Economic cooperation contributes to political and strategic stability. 

For Bilateral Relations: 

• Enhanced Cooperation: Trade facilitation builds trust and strengthens diplomatic ties. 
• People-to-People Connectivity: Improved trade infrastructure benefits businesses and communities on both sides. 
• Foundation for Future Collaboration: Creates framework for further economic integration.

What is the Implementation Framework? 

Protocol Amendment Process: 

• Ministers from both countries exchanged letters amending the protocol to the Treaty of Transit. 
• Formal diplomatic procedure ensures legal validity of amendments. 
• Both governments committed to implementing the changes expeditiously. 

Infrastructure Requirements: 

• Development of rail freight facilities at border points. 
• Customs and immigration infrastructure upgrades. 
• Coordination mechanisms between Indian Railways and Nepal Railways. 
• Technology integration for tracking and documentation. 

Regulatory Framework: 

• Harmonization of customs procedures. 
• Simplified documentation requirements. 
• Clear protocols for cargo handling and inspection. 
• Dispute resolution mechanisms.

What are the Strategic Implications? 

Regional Trade Architecture: 

• The amendment fits into broader South Asian economic integration efforts. 
• Demonstrates India's commitment to neighbourhood-first policy. 
• Could serve as model for similar agreements with other landlocked neighbors like Bhutan. 

China Factor: 

• Enhanced India-Nepal trade connectivity provides alternative to increasing Chinese economic presence in Nepal. 
• Strategic importance of maintaining strong economic ties with Nepal. 
• Balancing act in South Asian geopolitics. 

Economic Corridor Development: 

• The transit routes form part of emerging economic corridors in South Asia. 
• Potential for future expansion to include other sectors like energy and digital connectivity. 
• Foundation for integrated regional development.

What are the Challenges Ahead? 

Implementation Challenges: 

• Infrastructure Gaps: Existing rail and port infrastructure may require significant upgrades. 
• Bureaucratic Coordination: Effective implementation requires seamless coordination between multiple agencies. 
• Capacity Constraints: Rail freight capacity may need expansion to handle increased cargo volumes. 

Regulatory Harmonization: 

• Different Standards: India and Nepal may have different technical and safety standards. 
• Documentation Complexity: Simplifying paperwork while maintaining security remains challenging. 
• Customs Procedures: Ensuring efficient clearance processes at border points. 

Geopolitical Considerations: 

• Third-Party Sensitivities: Managing concerns of other regional players. 
• Political Stability: Implementation depends on stable political relations between both countries. 
• Local Concerns: Addressing concerns of local communities affected by increased freight movement.

Conclusion 

The amendment to the Treaty of Transit between India and Nepal represents a significant milestone in bilateral trade relations. By liberalizing rail-based freight movement and expanding transit corridors, both countries have demonstrated commitment to economic cooperation and regional integration. 

The enhanced connectivity through Kolkata-Jogbani, Raxaul-Nautanwa, and Visakhapatnam-Nautanwa routes will strengthen multimodal trade infrastructure and facilitate Nepal's access to international markets. This development not only benefits bilateral trade but also contributes to broader regional economic integration in South Asia.