Economic Interdependence: India is Nepal’s largest trading partner, contributing significantly to its trade and energy sectors, but efforts are needed to address Nepal’s trade deficit and boost its export capacity.
Cultural and Historical Bonds: Shared Hindu heritage, festivals, and linguistic connections strengthen India-Nepal ties, fostering mutual understanding and collaboration.
Opportunities in Santan and Mandir Economies: Sustainable tourism and temple-based economies offer significant economic potential, linking cultural preservation with economic growth for both nations.
India and Nepal share economic and cultural ties; however, much attention should be paid to the Hindu aspect of their interaction. This position looks at the historical background, financial integration, culture, and current issues affecting this bilateral relationship. It also builds on the seeds of the relationship by exploring the nature of the Santan economy and the Mandir economy. Analyzing all these dimensions, this paper submits that economic diplomacy is a game changer that can bring the people of India and Nepal together. The idea of an “Atmanirbhar” Nepal becomes the most significant and realizable paradigm considering the permanently shifting economic development and cultural kinship.
India and Nepal have especially cordial bilateral relations that encompass strategic, historical, socio-economic, and cultural diplomacy. The two countries share free and unfettered border accessibility not only in trade but in the movement of people, exchange of ideas, and culture. Taking cognizance of the Hindu civilization’s significance for India-Nepal relations brings useful perspectives for comprehending and identifying the forms of economic diplomacy between the two countries. These historic and cultural connections, current economic relations, and the phenomena of the Santan and Mandir economies point to increased opportunities for the development of bilateral relations in a world that is becoming increasingly complicated.
The Roots of Connection
India and Nepal have been linked since ancient times when both areas were influenced by the Maurya and Gupta empires. These empires promoted the transfer of ideas, systems of administration, and practices that shaped future relations. Archaeological records indicate trading relations between these regions existed well before the formation of present-day nation-states. Both India and Nepal largely retain their religious structure from Hinduism, making them of religious importance to each other.
India has an estimated 80% Hindu population, while Nepal has 81% Hindus, making religious destinations like the Pashupatinath Temple in Kathmandu sacred pilgrimage sites for both countries. The devotion to Hindu gods and sacred literature, such as the Ramayana (where Janakpur is identified as the birthplace of Sita), gives their religious connection a face. This shared religion fosters societal affinity and understanding, which are crucial to economic diplomacy as both nations respect each other’s cultures.
Economic Interdependence
India alone provides over 60% of Nepal’s total merchandise trade, making India Nepal’s largest trading partner. During 2022–2023, Indian exports to Nepal amounted to around $6 billion, while Nepal’s exports to India were about $1 billion, highlighting a trade imbalance and a trade deficit for Nepal amounting to around 18% of its GDP. The existing open border facilitates trade but underscores the need for Nepal to strategically boost its export capacity. In recent years, both nations have worked on measures to reduce this trade deficit, including financial inclusion through digital connectivity, better infrastructure development, and the construction of integrated check posts (ICPs).
Indian investments in Nepal focus on infrastructure, energy, tourism, and agriculture. Notable steps in energy cooperation include the 2022 Joint Vision Statement on Power Sector Cooperation. By 2023, Nepal exported approximately 650 MW of electricity to India, earning more than NPR 10 billion ($75 million). This revenue helps reduce the trade deficit and boosts foreign exchange earnings. Physical infrastructure, such as pipelines and upgraded border facilities, enhances trade efficiency and cuts costs for Nepal.
Cultural Overlaps: A Foundation for Trust
There is always a possibility of weakening the “people-to-people” relationship between India and Nepal due to various reasons, but cultural exchange programs have helped strengthen these ties. Festivals like Dashain and Tihar are celebrated in both countries, fostering social harmony and mutual understanding. Linguistic connections between Nepali and Hindi further facilitate educational and cultural cooperation. Sanskrit and other shared literary traditions enhance intercultural understanding and mutual appreciation.
Santan Economy
The Santan Economy is an ancient Indian economic model based on Hindu principles of preserving, using, and recreating resources sustainably. It supports grassroots tourism, promoting cultural preservation while boosting economic prospects without eroding heritage. Community-based tourism in regions like Lumbini empowers local populations and attracts visitors, contributing to sustainable economic growth.
Mandir Economy: Economic Potential of Religious Sites
Temple-based economies in both India and Nepal draw significant revenue from religious tourism. For instance, the Pashupatinath Temple attracts over one million tourists annually, directly contributing to the economy. These temples also support artisanal production and local businesses catering to religious tourism.
Critique on Economic Diplomacy
Despite strong historical and cultural foundations, several challenges threaten India-Nepal relations. Political variations can affect economic cooperation, necessitating an efficient diplomatic interface. Addressing trade imbalances requires Nepal to expand its export base while ensuring cultural considerations are respected, especially regarding debates on the revival of the Hindu monarchy in Nepal.
Shared Cooperation
The future of India-Nepal economic diplomacy lies in mutual interdependence, respect, and the vision of an “Atmanirbhar” Nepal culturally linked to India. Leveraging historical connections, religious affinities, and economic opportunities rooted in the Santan and Mandir economies can foster a robust partnership that enhances the well-being of both nations.
References-
- India’s relations with Nepal on the mend- https://www.deccanherald.com/opinion/editorial/india-s-relations-with-nepal-on-the-mend-1224866.html
- The Evolving Dynamics of India-Nepal Economic Ties-https://www.natstrat.org/articledetail/publications/the-evolving-dynamics-of-india-nepal-economic-ties-105.html
- Nepal and India’s Special Relationship and how it is getting better-https://universalinstitutions.com/nepal-and-indias-special-relationship-and-how-it-is-getting-better
- India-Nepal: Embracing Shared Prosperity- https://ciiblog.in/india-nepal-embracing-shared-prosperity/
- India and Nepal strengthen energy partnership with B2B petroleum infrastructure deal-https://np.indianewsnetwork.com/en/20241013/india-and-nepal-strengthen-energy-partnership-with-b2b-petroleum-infrastructure-deal
- Nepal and India’s special relationship – and how it is getting better-https://indianexpress.com/article/opinion/columns/nepal-and-indias-special-relationship-and-how-it-is-getting-better-9424984
Parag is pursuing his master’s at the Jindal School of International Affairs. Views expressed are the author’s own.
Aayush Pal 
Satish Chogule 
Nandhini T