India–Nepal trade likely to double by 2030 on back of investment and energy ties

By Admin

26 Dec, 2025

India–Nepal economic relations are set to enter a new phase of expansion, with bilateral trade projected to double by 2030, driven by stronger business linkages, rising investments and deepening energy cooperation, according to a recent report. Trade continues to be the most tangible pillar of the India–Nepal partnership, reflecting close geographic proximity, shared borders and long-standing economic interdependence.

Trade as the backbone of partnership
Trade remains central to India–Nepal relations, underscoring the depth of integration between the two economies. India is Nepal’s largest trading partner by a wide margin, accounting for more than 64 per cent of Nepal’s total trade. In FY 2024–25, two-way trade stood at around USD 8.7 billion, highlighting India’s critical role in Nepal’s external trade and supply chains.

India’s exports to Nepal were valued at approximately USD 7.4 billion and include petroleum products, machinery, automobiles, pharmaceuticals, food items and construction materials. These commodities are vital for Nepal’s infrastructure development, industrial activity and domestic consumption. On the other hand, Nepal’s exports to India, amounting to nearly USD 1.3 billion, comprise electricity, agricultural produce, iron and steel products and various manufactured goods.

Scope for diversification and value addition
While the current trade structure reflects strong economic integration, the report points to significant scope for diversification and higher value addition, particularly for Nepal. A more balanced export profile, supported by improved manufacturing capabilities and access to larger markets, could help Nepal enhance its trade competitiveness. With expanding commercial engagement and policy support, bilateral trade is expected to gain further momentum in the coming years.

Investment ties strengthening economic linkages
Investment has emerged as another critical pillar of the India–Nepal relationship. Indian companies are the largest source of foreign direct investment in Nepal, accounting for an estimated 30–35 per cent of the country’s total FDI stock. Cumulative Indian investments are assessed at USD 750–800 million, with around USD 670 million already operational across more than 150 Indian ventures.

These investments span key sectors such as hydropower, manufacturing, banking, insurance, telecommunications, cement, tourism, education and hospitality. Indian participation has played a significant role in supporting Nepal’s industrial growth and services-sector development, reinforcing long-term economic linkages between the two countries.

Energy cooperation as a growth driver
Energy cooperation has become a transformative force in India–Nepal relations. With economically viable hydropower potential estimated at over 40,000 MW, Nepal has transitioned from being a net electricity importer to a growing exporter. In FY 2024–25, Nepal exported electricity worth approximately NPR 17–18 billion, or around USD 130 million, with India absorbing the bulk of these exports.

Looking ahead, long-term agreements envisage Nepal exporting up to 10,000 MW of power to India over the next decade. This partnership provides Nepal with a stable source of export revenue while supporting India’s clean energy transition and enhancing regional grid stability. India’s role as a transit hub for Nepal’s electricity exports to third countries further highlights the deepening economic integration between the two neighbours.

Outlook towards 2030
With trade, investment and energy cooperation reinforcing each other, India–Nepal economic relations are poised for sustained growth. As business linkages deepen and infrastructure connectivity improves, bilateral trade is likely to expand significantly, potentially doubling by 2030. This evolving partnership not only strengthens economic resilience on both sides but also contributes to broader regional integration and development in South Asia.