INDO-NEPAL TRADE

Over the decades, India and Nepal have maintained very close trade links with each other. These trade ties have been facilitated by factors such as geographial proximity, social and cultural ties and ethnic similarites bnetween the two counteries. The basic frame-work for the two-way trade is provided by the Indo-Nepal Treaty of trade and transit which was signed on 6 December, 1991. Under the Treaty, trade between Nepal and India is conducted in rupees, besides the unique feature of liberal access, within agreed norms, of goods/manufactured items into each other's markets.

Between thjje fiscal years 1980-90, the total trade turnover between India nad Nepal increased from NRs 3171 million to NRs 3697 million. During the period India;s exports to Nepal increased from NRs 2197 million to NRs 3476 million. Nepals exports to India increased from NRs 992 million in 1980-81 to NRs 1035 million in 1989-90 crores. It may, however be indicated that the increase in the trade turn-over has not been impressive besides being restricted to a limited number of items.

INDO-NEPAL TRADE


                                                  Value in Millions
                                               Nepalese Rupees(NRs)

Year        Nepals's Exports to Nepal's Inports     Trade Defict
            India(FOB)          from India(CIF)
1980-81     992.4                   2179.2              1186.6
1981-82     994.4                   2480.9              1286.5
1982-83     843.3                   2499.6              1656.4
1983-84    1160.7                   3058.0              1897.3
1984-85    1601-7                   3895.6              2294.1
1985-86    1241.1                   3870.9              2729.8
1986-87    1302.6                   4262.0              2959.4
1987-88    1567.8                   4595.0              3028.0
1988-89    1034.9                   4238.7              3203.8
1989-90     221.8                   3476.7              3254.9

Source: Economic Survey, Ministry of Finance, HMG, Nepal.

Composition of Indo-Nepal Trade

A review of India's exports to Nepal during the past decade indicates that engineering goods account for the biggest group of export items to Nepal followed by Drugs, pharmaceuticals and other fine chemicals, glass, cements and tobacco(unmanufactured). Other important items are spices, cotton yarn, fabrics and madeups, coal, rubber, paper, tabacco (manufactured) etc.

India's imports from Nepal mainly comprise of oil seeds, pulses, edible oils, cereal and cereal preparations, artificial grains, jute etc.

India's Declining Share in Nepal's imports

India's share in the aggregate foreign trade of Nepal in the past was quite substantial but over the years has declined significantly. This can be seen from the table given below containing data regarding India's and third country's share in the foreign trade of Nepal.

Year       Total     Volume of Trade     % Share in    Total Trade
           India     other countries        India    other countries

1974-75    2222.4          481.8            82.2          17.8
1975-76    2120.8         1046.7            67.0          33.0
1976-77    2123.1         1049.6            66.9          33.1
1977-78    2032.2         1483.6            57.8          42.2
1978-79    2231.8         1949.7            53.4          46.6
1979-80    2307.3         2323.3            49.8          50.2
1980-81    3171.6         2865.3            52.5          47.5
1981-82    3275.3         3146.5            51.0          49.0
1982-83    3342.9         4103.1            44.0          55.1
1983-84    4218.7         3999.5            51.3          48.7
1984-85    5497.5         4985.2            52.4          47.6
1985-86    5212.0         7207.2            42.0          58.0
1986-87    5564.6         8332.0            40.0          60.0
1987-88    6163.6        11820.0            34.3          65.7
1988-89    5273.6        15185.4            25.8          74.2
1989-90    3698.5        13117.2            22.0          78.0

Source: Economic Survey, Report for 1989-90, HMG Nepal.
In this background it needs to be emphasised that the two countries should intensify thir efforts to expand bilateral trade for mutual benefit. Keeping in view Nepal's continuing trade deficit with India, there is also the need to increase the voulume of what Nepal exports to India besides exploring new areas.