India, Nepal sign pact to strengthen rail connectivity

India and Nepal on Thursday signed a landmark agreement to deepen trade connectivity through rail, expanding key transit routes that link the Himalayan nation to Indian ports and global markets, the ministry of commerce and industry said in a statement.

At a bilateral meeting in New Delhi, Union commerce minister Piyush Goyal and his Nepalese counterpart Anil Kumar Sinha exchanged a letter amending the Protocol to the Treaty of Transit between the two countries.

A Treaty of Transit is a bilateral agreement that permits goods from one country to move through another’s territory, facilitating smoother access to international trade routes and markets.

The move will allow the movement of rail-based freight between Jogbani (India) and Biratnagar (Nepal), including bulk cargo, under an expanded framework that liberalizes transit through major corridors such as Kolkata-Jogbani, Kolkata-Nautanwa (Sunauli), and Visakhapatnam-Nautanwa (Sunauli), the statement said.

“The letter of exchange (LoE) enables direct rail connectivity along the Jogbani-Biratnagar rail link for both containerized and bulk cargo, facilitating transport from the ports of Kolkata and Visakhapatnam to the Nepal Customs Yard cargo station located in Morang District, near Biratnagar in Nepal,” the ministry said in the statement.

“This rail link, constructed with grant assistance from the Government of India, was jointly inaugurated by the Prime Ministers of India and Nepal on 1 June 2023,” it added.

India is Nepal’s largest trading and investment partner, accounting for a major share of its external commerce.

The latest measures, the commerce ministry said, are expected to consolidate economic linkages, boost regional supply chains, and open new avenues for trade with third countries through Indian ports.

“The meeting (on Thursday) also welcomed ongoing bilateral initiatives to enhance cross-border connectivity and trade facilitation, including the development of Integrated Check Posts and other infrastructure,” it said.

“India remains Nepal’s largest trade and investment partner, accounting for a significant share of its external trade. These new measures are expected to further consolidate economic and commercial linkages between the two countries and beyond,” it added.

The agreement comes at a time of renewed political realignment in Kathmandu, where a change in government has reset the tone of Nepal’s foreign and economic policy.

Nepal has witnessed a dramatic political churn in recent months, driven by Gen Z-led protests in August. The demonstrations, fuelled by anger over corruption, joblessness, and governance failures, culminated in the collapse of the previous coalition government in September, marking one of the most significant public uprisings in recent years.

In the aftermath, Sushila Karki, Nepal’s first woman chief justice, was appointed as prime minister. Her government has since established a judicial inquiry commission to probe the violence and destruction during the protests and launched a reconstruction fund to rebuild damaged infrastructure and restore essential public services.

For India, the latest pact reinforces its strategic outreach in the neighbourhood under the Neighbourhood First policy. Strengthening rail and transit connectivity with Nepal, one of India’s closest partners, also carries wider geopolitical weight, particularly as China deepens its regional footprint through the Belt and Road Initiative.

“The political landscape in Nepal underwent a change with the youth-led protests—reflecting long-standing grievances related to corruption, governance, and inequality, which were exacerbated by relatively subdued growth and lack of job opportunities—culminating in the formation of an interim government,” the IMF said in a press note on Nepal in October.

“Despite the socio-economic challenges, economic recovery is projected to continue in FY2025/26, underpinned by budget measures to improve project execution and boost private sector confidence, while monetary policy remains accommodative,” it added.