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It is all set, but both sides have yet to officially announce the upcoming visit of Nepal’s Prime Minister KP Sharma Oli to India. Reports indicate that the visit is scheduled for 16–17 September 2025. In this connection, Indian Foreign Secretary Vikram Misri is arriving in Kathmandu on Aug 17 for a two-day visit.

High-level diplomatic visits are held at mutually agreed times through diplomatic channels. When it is realized that high-level engagements are necessary, such sojourns are arranged in mutual consultation. It is worth noting that there are frequent high-level visits between the two countries. Since May 2014, there have been 17 exchanges at the level of Head of State or Head of Government. These visits occur as per requirements, and there has been no gap in the highest political communication between the two countries.

Political relations 

Nepal-India relations are underpinned by shared cultural and societal cohesion. Looking back over the seven decades of friendship between the two countries, political relations have always been maintained, even though some hitches and glitches have appeared. Even in the hardest times, there has been no disruption of the highest level of communication, which stands as a symbol of deep relations.

High-level meetings between the heads of government also take place on the sidelines of different multilateral and regional forums. On April 4, Prime Minister Oli and Indian Prime Minister Modi met during the sixth Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Summit in Bangkok. Prime Minister Oli described the discussions as meaningful and constructive.

PM Oli and PM Modi also met on the sidelines of the 79th session of the UN General Assembly on 22 Sept 2024. The two leaders reviewed the bilateral relationship between India and Nepal and expressed satisfaction at the progress made in diverse sectors, including development partnership, hydropower cooperation, and people-to-people ties.

In Nepal, visits of the head of government to India have often been overstated, over-judged and over-concerned. This is unnecessary. Frequent communication at the highest level means that visits alone are not always the sole indicator of a smooth relationship.

Nepal requires India’s cooperation to realize the national aspiration of “Prosperous Nepal, Happy Nepali” set by Prime Minister Oli. Encouragingly, Prime Minister Modi has praised this aspiration and pledged India’s support to help make it a reality.

Pending issues

Pending issues between Nepal and India should be addressed amicably through diplomatic negotiations—a sentiment reiterated by both Prime Minister Oli and Prime Minister Modi.

The bilateral mechanisms have been consistently active in addressing these issues. Some matters, such as boundaries and water resources, require time to resolve. Certain issues have persisted for decades, inherited from history. Nonetheless, both leaderships should ensure that bilateral relations move forward progressively.

In the Eminent Persons Group (EPG) Report, the Indian side has maintained that it will be accepted at an appropriate time. If Nepal continues to receive this response, it should avoid raising the issue unilaterally too frequently. Established in January 2016 at the highest political level, the EPG was tasked with reviewing agreements and treaties, including the 1950 Nepal-India Friendship Treaty. It had finalized its report in 2018.

On issues like border management, both governments remain engaged and committed to resolution through diplomatic dialogue. Political leaders should provide strategic direction, but implementation should be carried out efficiently by technical and bureaucratic levels. Currently, India and Nepal operate more than 40 bilateral institutional mechanisms covering the full spectrum of relations, and these should meet regularly to resolve pending matters.

In recent years, India’s economic support to Nepal has increased. Physical and digital connectivity has expanded through the construction of border roads, integrated checkposts, transmission lines and petroleum pipelines. Major power sector milestones include the finalization of the Long-Term Power Trade Agreement, the trilateral power trade agreement between India, Nepal and Bangladesh, and agreements for the development of hydropower projects in Nepal by Indian developers, such as the 480 MW Phukot Karnali and the 669 MW Lower Arun. Key connectivity projects now facilitate Nepal’s access to sea lanes of transport and commerce.

Neighbors first

Nepal is a priority partner of India under its “Neighborhood First” Policy. In every form of support extended to Nepal and in every high-level meeting, the Indian side invokes Prime Minister Modi’s Neighborhood First policy, which also applies to India’s other neighboring states.

In this spirit, PM Modi visited the Maldives on 25–26 July 2025 as the Guest of Honour at the celebrations of the Maldives’ 60th Independence Day. During the visit, he reiterated that India has supported and will continue to support infrastructure development projects aligned with the priorities of the Maldivian people. Similarly, Sri Lankan President Anura Kumara Dissanayaka visited India on 15–17 Dec 2024. The Ministry of External Affairs (MEA) stated that Sri Lanka is India’s closest maritime neighbour in the Indian Ocean Region (IOR) and holds a central place in the Prime Minister’s vision of SAGAR (Security and Growth for All in the Region) and the Neighborhood First policy.

In Kathmandu, Indian Ambassador Naveen Srivastava and his team have maintained warm diplomatic relations with the Government of Nepal and all major political parties. Ambassador Srivastava’s tenure has been marked by constructive diplomacy and mutual respect, helping to address and set aside earlier perceptions regarding external involvement in Nepal’s internal matters.

It appears that India has, of late, renewed its understanding with the Oli-led government in Nepal, reflecting a recognition of its shared responsibility toward a close and valued neighbour. Consequently, Prime Minister Oli’s visit to India has been scheduled, with several important agreements expected to be signed during the visit. 

Reportedly, Prime Minister Modi will visit Nepal thereafter. There is hope that this much-anticipated exchange of visits will mark a fresh chapter in bilateral relations, paving the way for a “new normal” of constructive engagement and mutual trust.

There are three famous stupas in and around the Kathmandu Valley: Namo Buddha Stupa, Swayambhu Nath Stupa, and Boudha Nath Stupa. Interestingly, the two stupas within Kathmandu share the middle name Nath (associated with Shiva), while Namo Buddha does not. According to tradition, Namo Buddha’s history stretches back some 6,000 years, while Swayambhu and Boudha are said to be around 3,000 and 1,500 years old respectively.

In the 5th century, Lichhivi King Mana Deva I is recorded as having paid homage to the tomb of Na: Ma Buddha. He is believed to have established a Guthi (income-generating trust) and appointed a Bajracharya priest for daily chanting. He also commissioned four small stupas at the corners of the tomb, which remain preserved to this day. Legend holds that in the 8th century, Guru Padmasambhava visited the Hiramya Giri Gandhaman Hill to pay homage, offering a Vajra to Na: Ma Buddha. About four centuries ago, three incarnate lamas—Himetanjen Dharke, Top Ten Syakiya, and Sri—meditated at the site where Prince Mahasattva is said to have attained Bodhisattva. They depicted the scene of the prince offering his body to a tigress on a small slate-like stone, now covered by a larger image. They also built five large stupas atop the tomb. The main Namo Buddha Temple, with its central statue, was renovated in 1916 by a merchant from Ashon, Kathmandu. Local tradition claims that the Gula Baja Buddhist devotional music originated at Namo Buddha in ancient times before being adopted at Swayambhu.

According to legend, Swayambhu Nath emerged after the lotus seeds were planted by Bipaswi Buddha in Kali Daha 3,000 years ago. From them grew a miraculous shining lotus, attracting Buddhas, lamas, sages, and devotees from afar. Around that time, Mañjuśrī, visiting from Mount Wutai in China, came to pay homage to the radiant lotus and stopped at Na: Ma Buddha along the way. He is said to have drained the waters of Kali Daha, making the lotus accessible to the public. A symbolic monument was erected at the lotus site, named Swayambhu (“self-born”). Following the drainage, human settlements began, marking the origin of the Kathmandu Valley.

There are no surviving records of structures built by the earliest settler, Ne Muni, or during the Gwala (Gopalbansi) period. Tradition suggests a stupa existed during the Kirat dynasty, and around 500 BCE, Gautama Buddha visited Kathmandu during the reign of the seventh Kirat king, Jitedasti, to pay homage to Swayambhu. The Licchavis later adopted Swayambhu as their family deity, expanding and embellishing the site. King Manadeva of the Licchavis was a devoted worshipper, drawing spiritual strength from Swayambhu to guide his reign. During his time, the Guthis and the Bajracharya priestly community were organized to ensure regular chanting and ceremonial worship.

The construction of Boudha Nath is believed to have been initiated in the 4th century by a poultry farmer named Jyajima, with the approval of Lichhivi King Bhrishava Dev. After her death, her family completed the stupa. The relics (Astu) of both Bipaswi Buddha and Gautama Buddha were enshrined within, fulfilling Jyajima’s wishes.

A notable legend recounts that King Mana Deva I (404–505), seeking forgiveness for lives lost during military campaigns in western Nepal, went to worship his family deity at Swayambhu. In response to his prayers, Swayambhu instructed him to construct a Chaitya at Khasti, the present-day Boudha Stupa. Afterward, the king renounced his throne and pursued austerities and meditation at Vajrayogini in Sankhu. The Shakyas and Bajracharyas of Nepal, descendants of the Licchivis, continue to honor their family deity annually from Bhuikhel, the open ground at the foot of Swayambhu.

Swayambhu and Boudha, located in accessible urban areas, have benefitted from regular renovations over the centuries. By contrast, Nama Buddha, situated farther from densely populated regions and with fewer resources, received less attention. Even so, during the Malla period, festivals dedicated to Namo Buddha were celebrated in larger towns such as Panauti and Kathmandu. In today’s fast-paced world, more people are rediscovering the deep history and spiritual significance of Namo Buddha as a timeless source of compassion and harmony.

Recent statistics show a worrying rise in the smuggling of illegal drugs into Nepal from abroad. Majority of couriers caught in such cases are Indian nationals, according to police.

The number of Indian citizens involved in drug trafficking through Tribhuvan International Airport (TIA) has increased sharply, with over 80 percent of suspects caught smuggling drugs by air being Indian. According to the Narcotics Control Bureau (NCB) of Nepal Police, 45 Indian nationals in possession of drugs have been arrested in TIA from mid-July last year to mid-July this year. All of them were arrested for attempting to bring marijuana from Thailand. Seven of them are women.

Firoz Ahmad (35) from Jaunpur, Uttar Pradesh, used to work as a laborer on construction sites. An acquaintance offered him a job in Laos with a monthly pay of InRs 25,000 and a plane ticket included. When he reached Laos, he did not get the promised job. Instead, his contact asked him to travel back via Nepal and hand over a bag in Kathmandu. The bag contained four kilograms of heroin.

Similarly, Mouleswar Nanjundamurthy (32) from Erode, Tamil Nadu, an electrician by trade, was also taken to Laos with promises of high earnings. On his return, he was given a bag holding 3.8 kilograms of heroin and told to travel via Nepal. Both men are now in police custody, facing charges under the Narcotics Control Act.

According to NCB Chief Krishna Koirala, the two were arrested in the space of one day in the first week of August when they arrived in Kathmandu from Laos via Bangkok. The heroin was hidden inside chocolate packets. Police believe the mastermind, who recruited the two, could be the same person, and the drugs were intended to be smuggled into India via land routes from Nepal. Over the past year, police have arrested 307 Indian citizens and 18 from other countries for drug offences. A total of 5,001 drug offense cases have been filed in fiscal year 2024/25. About 52 tons of marijuana, 829 kilograms of hashish, 49 kilograms of heroin and over 20 kilograms of cocaine were seized during the year.

Another case involved 49-year-old Abdus Samad Jamil Mansuri (49) from Mumbai. With no steady work, he readily accepted offers for odd jobs. One day, he was promised payment to travel to Azerbaijan and bring back a suitcase. On arrival in Nepal, his suspicious behavior drew the attention of security personnel. When police searched him, they found 3.4 kilograms of cocaine hidden in plastic bags. He claimed that someone in Azerbaijan had asked him to take it to India.

Similarly, just days earlier, another Indian national, Rakesh Ohawal (65), was arrested with 6.5 kilograms of heroin hidden in his luggage.

In the past, most foreign nationals arrested in Nepal for drug trafficking were in transit to third countries. Recently, however, Indian nationals have been found smuggling drugs from Thailand to India via Nepal. One major drug smuggled is Thailand’s marijuana, which is specially cultivated and chemically treated. NCB officials say this drug is long-lasting and highly potent, and is in high demand in both Nepal and India.

NCB spokesperson Janak Bahadur Shahi said Indian nationals smuggling drugs by air are often poor and unemployed, lured with fixed payments to act as carriers. “Trafficking rings send them to Thailand as tourists and then hand them drug-filled bags when they return,” he added.

A few weeks ago, a young woman from Manipur, India, was arrested at TIA with Thai marijuana. She had been promised Rs 50,000 by traffickers.

Nepal’s role as a drug transit point is not new. For years, traffickers have used Nepal to move drugs to third countries. The question remains: is this because Nepal’s security is weak?

NCB chief Krishna Koirala explains that drug trafficking is an organized, international crime with a complex network. Smugglers do not rely solely on Nepal; they also operate via Indian airports. Security checks at TIA are strict, and police monitor passenger lists from high-risk countries to identify potential smugglers.

Nepal Police Spokesperson Binod Ghimire said the nationality of traffickers is less important than their role in the crime. While Africans are more often involved in cocaine and heroin smuggling, Indians now dominate cases involving Thai marijuana. Police say traffickers are favoring Indian nationals due to practical reasons. “Nepal and India share an open border, and Indian citizens do not need a visa to enter Nepal. Security checks for Indians are generally less stringent, making them easier targets for recruitment,” Ghimire said. “After increased scrutiny of couriers from other countries, traffickers seem to have begun using Indian couriers.”

Many of these carriers do not know the full extent of the operation, nor who owns the drugs they carry.  According to Ghimire, traffickers use multiple routes simultaneously to move drugs, and the high prices on the international market make the trade extremely lucrative for organized crime syndicates.

In today’s global economy, tariffs have evolved from mere protectionist barriers to tools of geopolitical strategy. The US-China tariff war, which began during Donald Trump’s first term in 2018, has already brought about a decisive shift in global trade flows.

The latest US decision to extend targeted tariffs on selected Indian goods has been framed as a ‘leveling measure’. Yet, it has also created new impetus for India to deepen market access discussions with Washington and strengthen its position as a reliable trading partner. This move could be a catalyst for India to negotiate more favorable long-term terms by demonstrating its manufacturing flexibility.

Nepal also has many goods on the top list of goods imported from neighboring India. This means that the new US customs policy will inevitably have an impact on Nepal-India trade and the overall economy of Nepal. After the upgrade to a developing country, Nepal’s preferential market access facility (GSP) period has expired and the country has started to face a 10 percent customs duty, which seems to be an opportunity for the country not to increase it.

After this, it can be expected that investment will flow into Nepal from abroad and exports will increase. A large part of Nepal's trade—both exports and imports—depends on India. According to the data of the Customs Department, 64 percent of Nepal’s imports in the fiscal year 2024-25 came from the Indian market.  Similarly, India accounted for 67 percent of total exports. Since this is the case, changes in the US-India trade policy are certain to affect Nepal.

The US has imposed a 50 percent reciprocal tariff on India and a 10 percent tariff on Nepal, which is expected to give Nepal a competitive advantage in trade, but Nepal needs to take concrete steps from product development to export promotion to produce the quantities it can export to the US.

Looking at the past, the US is Nepal’s second largest export destination after India. Nepal exported goods worth Rs 18.32bn to the US in 2024-25, which is six percent more than the previous year.

This should be taken as an encouraging and positive step. In addition, to make all this sustainable and increase further, it is necessary and imperative for Nepal to create a joint mechanism between the government and the private sector to reduce transshipment risks and take advantage of customs rates.

There should be no delay on this front. The US has imposed only 10 percent reciprocal customs duty on Nepal. In such a situation, if trade negotiations with India fail and a 50 percent customs duty is imposed on India, there will be a 40 percent difference in customs rates between Nepal and India.

Even if the recently-imposed additional 25 percent customs duty is withdrawn, the difference in customs rates between these two countries will be 15 percent. Even a 15 percent difference in customs rates is very large in international trade. Nepal should be able to use this situation to its advantage.

Nepal’s main exports to the US are woolen carpets, rugs, ready-made garments, felt goods, clay and other metal utensils and handicrafts. In addition, apart from India, the US has imposed a 19–20 percent customs duty on other countries in the region—Bangladesh, Pakistan and Sri Lanka—which gives Nepal a competitive advantage.

In short, India has been exporting more goods such as carpets, textiles and rugs to the US than to Nepal. Similarly, Bangladesh is the largest exporter of ready-made garments in South Asia.

And, the US is also importing from it. Nepal also uses Indian land for trade with third countries. Although the trade war between India and the US could also bring uncertainty to Nepal’s trade routes with third countries, its likelihood is low.

The new US tariff policy seems to make Indian goods more expensive in the US market. As a result, Indian manufacturers may have to restructure their production systems. If India starts losing the US market, the Nepali market will also become more expensive, given chances of India adopting a policy of reducing production. Most of the industries operating in Nepal import raw materials from India and this means our production costs may go up. Machinery parts, industrial equipment, clothing and agricultural products from India are most likely to become more expensive in Nepal, exposing the Nepali populace to the risk of a high inflation. 

In addition, the Indian rupee will weaken further as India’s exports are affected and dollar income decreases. This problem will be further complicated by the fact that Nepal’s currency is ‘pegged’ with the Indian currency. This is also the reason why Nepal’s monetary policy has not been independent.

This will naturally have an impact on the Nepali rupee. As a result, not only will Nepal’s dollar income decrease, payments will also become more expensive. In that case, the interest on foreign loan assistance will be expensive and so will the repayment.

The Nepali market may also benefit from the Indo-US trade war. If Indian products cannot enter the US market easily, India may adopt a policy of reducing prices and seeking alternative markets. Nepal can benefit from that. If India adopts this policy, the price of Indian goods imported into Nepal, such as food, industrial raw materials, and machinery parts, may decrease. According to public data, Nepal currently exports ready-made garments worth around Rs 4bn to the US. There is no doubt that this is likely to increase many times over in a few years if the existing customs duty remains in place.

If this policy works in the long term, the ‘backward forward linkage’ of the export-oriented Nepali industry is certain to become even stronger. After the 2015 earthquake, the US had given Nepal preferential market access to 77 different items. The Nepal government should take the initiative for similar preferential market access. For now, it is too early to analyze how Trump’s policies will pan out. But if implemented, India’s export earnings will decrease. The direct impact of this will be a decrease in dollar income for India as well as Nepal, making foreign payments expensive. This will ultimately mean a surge in inflation. There is also the danger of the US aggressive ‘tariffs’ triggering a global economic recession.