India-Nepal: Comprehensive Partnership Agreements Can Increase Trade

26 January 2015

The Power Trade Agreement (PTA) and the Power Development Agreements (PDAs) are recent developments that have renewed optimism in an India-Nepal economic cooperation. The PTA is expected to encourage international investment in Nepal’s hydropower sector while the two PDAs are expected to boost investor confidence in Nepal’s water resources. According to experts, the latest agreements have increased cooperation in the untapped power sector, and a comprehensive partnership agreement could help boost trade and investment between India and Nepal.

The PTA allows the trade of energy as other commodities, and can help Nepal reduce its growing trade deficit by exporting power and reducing the import of petroleum products. While Indian companies have concerns such as the lack of cross-border transmission lines and absence of an electricity trading company, the hydropower sector still received the largest commitment from Indian companies.

“There is a need for deeper integration for Nepal to benefit from a booming Indian economy,” said trade expert Posh Raj Pandey. He said a comprehensive agreement involving trade of energy, goods and services, bilateral investment promotion, and exchange rate, among others, would give Nepal an edge in bargaining with India. “Under the agreements currently, India is the giver and Nepal is the taker,” he added. “Under a comprehensive partnership, Nepal will also be in a position to give, which enhances Nepal’s bargaining power.”


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