RIS Discussion Paper Series - Analyzing India-Nepal Economic Integration: Status, Challenges

In order to reset the trade ties, India and Nepal signed a new Treaty of Trade in 1971, which for the first time offered tariff and other concessions to Nepal on a non-reciprocal basis. [...] During the seven years for which the 2002 trade treaty was in force, the India Nepal trade relations were further strengthened and India’s share in Nepal’s global trade increased from 43 per cent in 2002 to 58 per cent in 2009. [...] The exports of these two products from Nepal to India have indeed declined to zero after the revision of the treaty in 2002. [...] Instead of increasing, over the next ten years, Nepal’s exports to the rest of world declined to US$ 0.30 billion in 2019 and the number of products exported remained almost the same. [...] In order to overcome this, we compare the unit value to the supplier’s global exports with the unit value to the receiver’s global import and dropped all products for which the supplier’s average unit value of export is significantly higher than the unit value of receiver’s global import.