Key Points

India has stepped up security at the borders, with reports of fire being sighted in some villages across Panitanki in the Darjeeling district of West Bengal. There were similar reports from Bihar, where violence and jailbreaks occurred across the border in Saptari and Birgunj of Nepal. The situation is almost similar at entry points in Uttar Pradesh.

Traffic continues to be either at a standstill or trickling -- for individuals in urgent need -- at the entry points, affecting the Himalayan nation's trade relations.

India is Nepal's largest trade partner, with the volume of bilateral trade exceeding NPR 1,134.53 billion (over USD 8 billion at the current exchange rate) in the fiscal year 2022-23, according to a document released by Nepal's embassy in New Delhi on May 8.

It added that imports in the 2022-23 fiscal amounted to NPR 1,027.84 billion (more than USD 7 billion now) and exports to India stood at over NPR 106.69 billion (about USD 755 million).

Generally, bilateral trade takes place in Indian rupees, with the currency convertible in all banks and financial institutions in Nepal.

The two governments regularly convene the Inter-Governmental Committee on Trade, Transit, and Cooperation to streamline market access and tariff harmonisation, customs documentation and online certificates of origin, joint infrastructure projects, etc.

These mechanisms ensure the swift movement of staple commodities (like wheat, sugar, and petroleum products) and facilitate Nepal's access to global markets beyond India.

Under the 1996 India-Nepal Trade Treaty and the 2009 Transit Treaty, goods in transit (like Nepali exports bound for Bangladesh) use multiple Indian land ports.

According to Kathmandu, imports from India have increased substantially in recent times. Such items include petroleum products, transport equipment and spare parts, electronics, machinery and parts, rice, crude soya bean oil, medicine, telecommunication equipment, readymade garments, fertiliser, coal, etc.

The Trade Treaty, Agreement of Cooperation to Control Unauthorised Trade (2009), Treaty of Transit (1999), and Rail Services Agreement (2004) are among the instruments providing for the bilateral mechanism for trade and transit.

Nepal enjoys duty-free access into the Indian market (with existing domestic tax) for manufactured goods on a non-reciprocal basis, except for a short negative list.

The Agreement for Cooperation between India and Nepal to Control Unauthorised Trade was signed on October 27, 2009, providing the legal framework for checking illegal trade.

In January, Kathmandu hosted a crucial joint meeting of the India-Nepal Inter-Governmental Committee (IGC) on Trade, Transit, and Cooperation to Combat Unauthorised Trade.

It highlighted the need to review the strategies for enhancing investments and the development of commercial infrastructure between the two nations.

The Nepal-India Treaty of Transit (1992), renewed every seven years, provides for port facilities to Nepal at Kolkata, Haldia (West Bengal), and Visakhapatnam (Andhra Pradesh).

For bilateral trade, 27 entry-exit points are designated along the Indo-Nepal border.

The Rail Services Agreement, 2004, prescribes details for operating and managing rail services between India and Nepal. As per a Letter of Exchange (LoE) of Rail service Agreement, signed on Jul 9, 2021, all cargo train operators can utilise the Indian Railway network.

Citizens of the two countries enjoy easy access across the border with minimum intervention. However, occasional flare-ups have resulted in the borders being closed or kept under strict regulations.

Like other instances in the past, traders and business houses are expecting the current strife will also be over soon, and the free flow of goods will resume.

- IANS