Ever since I can remember, India and Nepal have shared not only their geographical borders, but also a unique and interdependent system for trade activity. When comparing the two nations on various aspects, the landlocked Nepal is highly dependent on India to support its trade activity and supply chains. With India host to a number of sea ports as well as inland waterways, the importance it holds to its northern neighbour is not left to the imagination. In fact, India’s ports and inland waterways play a vital role in enhancing Nepal’s supply chains, fostering economic growth, and strengthening regional connectivity.
For instance, just last month, Nepal signed a revised treaty of transit with India during Prime Minister Pushpa Kamal Dahal’s visit to India at the same time. The revised treaty gives Nepal access to three of India’s river ports, namely, Sahibganj, Kalughat and Varanasi.
Coming to what it means for India’s neighbour, it will result in creating major cost efficiencies for Nepal when it comes to access to the sea. A considerable part of Nepal’s trade activity has conventionally been done via railroads, however, most of its EXIM activity now takes place through Kolkata and Haldia ports of India. Occasionally, Nepali goods also travel via the Vishakhapatnam Port in Andhra Pradesh, which was made accessible to Nepal in 2016.
As Nepal gets even increased access to India’s connectivity nodes (leading to a reduction in logistics costs) goods moving out of the country will become more competitive. Considering the already small export basket of the country, better access to international markets will be extremely beneficial for exporters. It will also reduce Nepal’s dependence on limited overland routes, resulting in diversified trade opportunities and improved supply chain reliability.
Apart from lower logistics costs, other benefits include lower carbon emissions and lower strain on already congested road networks. Furthermore, the reliability of inland waterways is going to minimise the impact of seasonal disruptions, allowing for year-round trade operations.
Moreover, access to India’s ports and inland waterways is expected to induce alleviated infrastructure development within Nepal – more of roads and rail lines connecting ports manufacturing and logistics nodes, warehousing facilities, etc.. Nepal’s main rivers will also need better terminal infrastructure to fully leverage the country’s own waterways network as well as that of India.
Experts suggest that India should develop infrastructure including ports close to Nepal while Nepal should also build its own infrastructure to enable transportation of goods through the waterways.
A unison for connectivity between the two nations also holds the potential to catalyze private sector participation, attracting both domestic and foreign investment in Nepal’s logistics sector and improving the overall economy.