New Delhi: India and Nepal could sign two economic pacts and an agreement for a $250 million (Rs 1,243 crore) line of credit for Kathmandu during Prime Minister Baburam Bhattarai’s 20-23 October visit to India, two people familiar with the development said.

Bhattarai, Nepal’s second Maoist Prime Minister and fourth overall in as many years, arrived in New Delhi on Thursday. This is his first visit abroad.

Strengthening ties: Nepal Prime Minister Baburam Bhattarai. BY Vipin Kumar/Hindustan Times

“Personally, my focus will be to foster closer development partnership with India. The new paradigm of Indo-Nepal relations will be to foster development partnership," Bhattarai said.

India and Nepal are close to concluding a bilateral investment protection agreement and an avoidance of double taxation agreement, said one of the persons cited above, asking not to be identified.

“They could be signed tomorrow (Friday)," he said, adding that the two agreements could boost Indian investment in the Himalayan country. India is Nepal’s largest trade partner and source of foreign investment and tourists, according to the Indian foreign ministry. Indian investments, amounting to 1,586 crore with 462 foreign direct investment projects, account for 44% of foreign investments in Nepal.

“Bilateral trade between India and Nepal has increased substantially since the signing of the trade treaty in 1996 and received further impetus after the signing of the revised trade treaty in 2009, which has provisions that allow Nepal greater access to the Indian market," the Indian foreign ministry said on its website.

Provisional trade figures for 2010-11 show that Nepal’s bilateral trade with India stood at 16,129.7 crore, which accounted for 58.7% of Nepal’s total external trade, the ministry data said.

India could extend Nepal a $250 million line of credit for development activities in a country still dealing with the aftereffects of a decade-old civil war that ended in 2006, said the second person cited above, who also requested anonymity.

In 2008, Nepal abolished its two-centuries-old monarchy and declared itself a republic. But the country has not been able to draft a constitution and is still grappling with the question of integrating 19,000 former rebel Maoist fighters into a reluctant Nepalese army.

At a function in New Delhi soon after his arrival, Bhattarai said one of the challenges he and his party faced was to usher in real and participative democracy that will allow people to participate in the decision-making process. “So this is a big challenge for us," Bhattarai said.