New Delhi, April 16 India’s role in Nepal's progress will become increasingly crucial as the Himalayan nation prepares to graduate from least developed country (LDC) status in November 2026, a new report has said.
Completion of connectivity projects and the full realisation of the Agreement for Long Term Power Trade will reduce Nepal’s trade deficit with India, the report from East Asia Forum said.
While Nepal aims to strengthen manufacturing capacity and boost exports to ensure a "smooth transition" out of LDC status, energy and infrastructure cooperation with India will be an indispensable role in the shift.
"In recent years, the bilateral special partnership has shifted from traditional infrastructure to a ‘high-tech, high connectivity’ model, underscored by a major push to invest in digital integration and energy cooperation," the report said.
The 25‑year power trade agreement signed in January 2024 envisages Nepal exporting 10,000 megawatts to India over the next decade, and both countries are upgrading low‑capacity transmission systems from 132/33 kilovolt (kV) to 400 kV to support growing exports.
India has been actively facilitating 40-megawatt power transmission from Nepal to Bangladesh under a trilateral arrangement signed in October 2024, which expanded to 60 MW annually in late 2025.
"A dedicated high-capacity transmission line between Nepal and Bangladesh through Indian territory will be crucial to meeting Bangladesh’s growing energy needs and Nepal’s hydropower ambitions," the report noted.
Indian collaboration with Japan and European nations can also facilitate development-related investments in Nepal. A focused, growth-oriented development partnership based on proactive political willingness is a win-win for India and Nepal,” it said.
The report, however, flagged that regulatory delays, financing gaps and implementation challenges are undermining progress.
For instance, the proposed Anarmani–Siliguri cross-border transmission line hinges on the completion of Nepal’s Hetauda–Inaruwa–Anarmani line, which faces delay due to Right of Way disputes, forest clearance delays and procedural bottlenecks. The line is the gateway for Nepal to sell power to Bangladesh through the Indian grid.
Indian companies hold ownership or survey licences in roughly 5000 megawatts of Nepali hydropower projects, but some even face delays in reaching an agreement on the detailed project report.
Under construction hydropower projects face challenges such as high seismic risk, loss of forest corridors, cost overruns from bureaucratic delays and local community backlash over resettlement and compensation.
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