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Indo-Nepal Trade and Investment: An Analysis

Author

Listed:
  • Nisha Taneja

    (Nisha Taneja is Professor at Indian Council for Research on International Economic Relations. Her broad areas of interest include WTO issues, regional trade, industrial economics, and institutional economics. In recent years she has worked on tariffs, non-tariff barriers, and transport issues related to India-Nepal, India-Sri Lanka, India-Pakistan, India-Bhutan, India-Korea, India-Japan, India-China and sub-regional cooperation between India, Bangladesh and Myanmar.)

  • Shravani Prakash

    (Shravani Prakash is an Independent Consultant on Economic and Trade Policy Research. She has more than 15 years of experience in policy-oriented research in India on areas including regional trade in South Asia, trade and transport facilitation, non-tariff barriers, informal trade, WTO and trade policy issues, FTAs, trade in services; among others. She was earlier Research Associate at Indian Council for Research on International Economic Relations (ICRIER) and has been a short-term consultant with World Bank in India. She holds a Masters in Economics from University of Warwick.)

  • Samridhi Bimal

    (Samridhi Bimal is Fellow at ICRIER, New Delhi. She has over eight years of research expertise on international trade and trade policy issues related to the WTO, regional trading agreements and domestic trade policies. She has worked extensively on South Asia on a wide array of issues including trade, investment, transport facilitation, non-tariff barriers and informal trade. She has also been associated with the World Bank as a Short-term Consultant for their programme on Regional Integration in South Asia. Her research areas of interest include international trade, development policy and regional economics. She holds a PhD in Economics from Jawaharlal Nehru University, New Delhi.)

  • Sakshi Garg

    (Sakshi Garg is a Research Assistant at Indian Council for Research on International Economic Relations (ICRIER), Delhi. She is doing policy-oriented research on issues pertaining to Economic Integration in South and South-East Asia. The themes she has worked on include Regional trade, Trade Facilitation, Informal Trade and Connectivity. She holds a Master’s degree in International Business Economics and Finance from Gokhale Institute of Politics and Economics and a B.A. (Hons.) in Economics from Gargi College, University of Delhi. Her broad research interests include Trade and Development and WTO issues.)

  • Riya Roy

    (Riya Roy is currently a graduate student at the Graduate Institute of International and Development Studies, Geneva. She is pursuing a Master in International Affairs specialising in Trade and Finance. She has a Bachelor’s degree in Economics from IPCW, University of Delhi. At ICRIER, she has actively worked on international trade and investment policies, regional trade agreements and South Asian connectivity and integration. She is currently working with the WTO as a Capstone student researcher on opportunities and challenges of shifting from consensus-based decision making to Plurilateral Joint Initiatives. Her broad research interests include trade policies, WTO issues, formalisation of informal trade, development, and gender.)

Abstract

India and Nepal have traditionally shared a unique relationship of friendship and economic cooperation. The relationship is characterised by an open and people-friendly border and is built on shared historical, cultural, linguistic and ethnic links between people residing in India and Nepal. With Nepal being a priority under India ‘Neighborhood First’ policy, strengthening the economic relationship holds immense significance and potential for both the countries. While the political relations between India and Nepal have been extensively studied, there is not much literature that explores the economic relationship between the two nations. This is an important issue to study, as India is Nepal’s largest export market, the biggest source of its imports, the top investor of foreign capital stock and among the largest donors of foreign aid. India also provides Nepal transit facility through its territory to access seaports for trading with the rest of the world. Given this, the main objective of this article is to suggest policy measures, which can increase bilateral trade and investment between India and Nepal. The article analyses the bilateral trade patterns and estimates the maximum additional trade potential. A wide range of issues of importance pertaining to bilateral trade, including tariffs, levy of an agricultural reform fee, under utilisation of the tariff rate quota, non-tariff measures, issues related to Rules of Origin (ROO) and physical barriers to cross-border movement of goods are discussed. The trends and changing sectoral composition of India’s investment in Nepal and barriers and opportunities for Indian investment in Nepal are also analysed. The article concludes by charting a way forward for bolstering economic cooperation between the two countries by listing down recommendations for enhancing trade, addressing non-tariff barriers, upgrading infrastructure to improve connectivity and enhancing Indian FDI in Nepal. JEL Classification: F10, F13, F15, F50, F53, P45

Suggested Citation

  • Nisha Taneja & Shravani Prakash & Samridhi Bimal & Sakshi Garg & Riya Roy, 2020. "Indo-Nepal Trade and Investment: An Analysis," India Quarterly: A Journal of International Affairs, , vol. 76(2), pages 243-275, June.
    • Handle: RePEc:sae:indqtr:v:76:y:2020:i:2:p:243-275
    DOI: 10.1177/0974928420917799
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    References listed on IDEAS

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    1. Shiro Armstrong, 2007. "Measuring Trade and Trade Potential: A Survey," Asia Pacific Economic Papers 368, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
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    Citations

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    Cited by:

    1. Attasit Pankaew & Suppawit Kaewkhunok, 2022. "The new equation of South Asia region: The rising role of China in Nepal's foreign policy," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 25(2), pages 121-137, June.
    2. Jai Prakash Yadav & Bimlesh Singh, 2024. "India’s Export Potential to Southern African Customs Union," Insight on Africa, , vol. 16(1), pages 22-45, January.

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    More about this item

    Keywords

    India–Nepal; bilateral trade; bilateral investment; trade in services; non-tariff barriers;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • P45 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - International Linkages

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