India–Nepal economic relations are poised to enter a new phase of expansion, with bilateral trade projected to double over the next five years, driven by stronger business linkages, rising investments and deepening energy cooperation, according to a report.
Trade continues to be the most tangible pillar of the India–Nepal partnership, reflecting close geographic proximity and long-standing economic interdependence. India remains Nepal’s largest trading partner by a significant margin, accounting for more than 64 per cent of Nepal’s total trade. In FY 2024–25, two-way trade stood at around USD 8.7 billion, underlining India’s central role in Nepal’s external trade and supply chains.
India’s exports to Nepal, valued at about USD 7.4 billion, largely comprise petroleum products, machinery, automobiles, pharmaceuticals, food items and construction materials—commodities essential to Nepal’s infrastructure development and domestic consumption. Nepal’s exports to India, amounting to nearly USD 1.3 billion, include electricity, agricultural produce, iron and steel products and a range of manufactured goods.
While the current trade structure highlights the depth of integration between the two economies, the report notes significant scope for diversification, higher value addition and a more balanced export profile for Nepal. With expanding commercial engagement and sustained investments, bilateral trade is expected to gain momentum and potentially double by 2030.
Investment ties form another critical dimension of the relationship. Indian companies are the largest source of foreign direct investment in Nepal, accounting for an estimated 30–35 per cent of the country’s total FDI stock. Cumulative Indian investments are assessed at USD 750–800 million, with around USD 670 million already operational across more than 150 Indian ventures.
These investments span strategic sectors such as hydropower, manufacturing, banking, insurance, telecommunications, cement, tourism, education and hospitality, positioning India as a key contributor to Nepal’s industrial growth and services-sector development. Indian participation has been particularly impactful in the hydropower sector, combining finance, technology and assured power purchase arrangements to strengthen Nepal’s energy security while delivering long-term commercial benefits.
Energy cooperation has emerged as a transformative force in bilateral relations. With economically viable hydropower potential estimated at over 40,000 MW, Nepal has, in recent years, shifted from being a net electricity importer to a growing exporter. During FY 2024–25, Nepal exported electricity worth approximately NPR 17–18 billion (around USD 130 million), with India absorbing the bulk of these exports.
Looking ahead, long-term agreements envisage Nepal exporting up to 10,000 MW of power to India over the next decade. This partnership not only provides Nepal with a stable export revenue stream but also supports India’s clean energy transition and enhances regional grid stability. India’s role as a transit hub for Nepal’s electricity exports to third countries further underscores the deepening economic integration between the two neighbours.
