UPSC Darpan

International RelationsGS219 September 2026

Jaishankar Meets Nepal's Finance Minister Wagle as Delhi and Kathmandu Prepare a Reset

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The news

Nepal's reconstruction plans after the floods and the “reset” of India-Nepal ties with the newly elected government were at the top of the agenda as External Affairs Minister S. Jaishankar met Nepal's Finance Minister Swarnim Wagle in New Delhi on Friday, as both sides prepare for a visit by Nepal Prime Minister Balen Shah to New Delhi later this year. Mr. Jaishankar said he offered his deep condolences to Mr. Wagle over the recent flash floods and, in a social media post that tagged the government's “Neighbourhood First” slogan, said the two had “discussed ways to strengthen our overall cooperation, especially in economic, energy and connectivity domains”. He had met Finance Minister Nirmala Sitharaman on Thursday, when India committed to continuing support for Nepal's recovery efforts. According to officials, the entire reconstruction required after the floods on August 26, which have left more than 1,400 dead and more than 6,000 missing, will top $5 billion. Nepal will appeal for multilateral support at the UN General Assembly next week in New York, where Mr. Shah is expected to make his first international speech. Mr. Wagle is in Delhi on his first visit abroad since he took office and will travel soon to Doha for a meeting of the Board of the China-led Asian Infrastructure Investment Bank and to the IMF and World Bank meetings in Bangkok. In a readout, the Finance Ministry said Mr. Wagle thanked India for its assistance after the floods on the Trishuli river, which overflowed in areas on both sides of the Nepal-China border and destroyed a major Chinese border crossing at Rasuwa. The two also discussed “initiatives to enhance connectivity”. Nepal wants to explore road and rail links, but officials said they are keen to resolve the long-pending issue of overflight for flights to Nepali airports: India's denial of permission for bi-directional flights to the Gautam Buddha International Airport at Bhairahawa near Lumbini and to Pokhara International Airport has caused Nepal major financial losses in debt repayments. Mr. Wagle's visit follows that of Foreign Minister Shishir Khanal in June, part of a call by ruling Rashtriya Swatantra Party chairman Rabi Lamichhane for a “reset” in ties troubled over the past few years on both boundary disputes and economic issues. Officials said the Shah government, in office since March this year, has been positive about engagement with New Delhi despite misgivings that led to the cancellation of Foreign Secretary Vikram Misri's visit to Kathmandu in May.

The chain in one line: August 26 floods on the Trishuli kill more than 1,400 → reconstruction bill tops $5 billion → a new Kathmandu government needs finance and market access at once → the ruling RSP calls for a reset after years of boundary and economic friction → Wagle's first foreign trip is Delhi, before the AIIB board at Doha and the Bretton Woods meetings at Bangkok

Static syllabus linkage

  1. Every reset argues about the 1950 Treaty, so know what it actually says. The India-Nepal Treaty of Peace and Friendship, 1950 is the foundational instrument of the relationship. Its operative provisions give nationals of each country national treatment in residence, property, participation in trade and commerce and movement in the territory of the other, which is the legal basis of the open border and of Nepali citizens working in India without a permit. It also contains a mutual security understanding under which each side consults the other on threats from a foreign aggressor. Nepal has demanded revision for decades on the ground that the treaty was signed by a Rana government days before its fall, and an India-Nepal Eminent Persons Group constituted to suggest revisions finalised its report in 2018, which has still not been formally received at the political level on the Indian side.
  2. A landlocked state's trade is a question of transit law, not of goodwill. Nepal is landlocked and the overwhelming share of its third-country trade moves through Indian territory and Indian ports under a bilateral Treaty of Transit, renewed periodically, which is separate from the Treaty of Trade. International law supplies the backdrop: Article 125 of the UN Convention on the Law of the Sea gives land-locked states the right of access to and from the sea and freedom of transit, but leaves the terms to be agreed bilaterally with the transit state. Nepal signed a transit and transport agreement with China in 2016 precisely to create a second option after the 2015 border blockade, which is why connectivity is never a purely commercial subject in Kathmandu.
  3. The boundary dispute has a treaty date and a map date, and candidates confuse them. The Treaty of Sugauli, 1816, concluded between the British East India Company and Nepal after the Anglo-Nepalese War, fixed the Kali river as the western boundary. The dispute is not about the treaty but about which stream is the Kali, and therefore about the status of Kalapani, Lipulekh and Limpiyadhura. In 2020 Nepal amended its Constitution to adopt a revised political map showing these areas within Nepal, which converted an administrative disagreement into a constitutional position that any Nepali government now finds difficult to move from. India's position is that the matter is to be settled through the established bilateral mechanisms.
  4. AIIB is a multilateral development bank, not a Chinese ministry. The Asian Infrastructure Investment Bank began operations in 2016 with its headquarters in Beijing. China is its largest shareholder and India its second-largest, and India has been among its largest borrowers, which is why the frequent description of it as simply a Chinese instrument is inaccurate and unhelpful in an answer. For a finance minister assembling reconstruction money, the AIIB board, the IMF and the World Bank are stops on the same itinerary as New Delhi, and a candidate who reads the itinerary as a choice between blocs has misread it.

Why UPSC loves this

  1. The syllabus names this directly. GS2 carries “India and its neighbourhood — relations” as a standalone head, and Nepal is the neighbour where the widest range of instruments is in play at once: a treaty of peace and friendship, a treaty of transit, a river treaty, an open border and a power-trade arrangement. Questions on the neighbourhood reward the candidate who names instruments rather than sentiments.
  2. Examiners prefer the structural irritant to the news event. A visit is not examinable; the overflight question, the transit dependence, the 1950 Treaty revision demand and the Kalapani boundary are, because they recur. Anchor any Nepal answer on those four and the news becomes an illustration rather than the substance.
  3. Disaster response as a diplomatic instrument is a live theme. Humanitarian assistance and disaster relief has become a recognised element of India's neighbourhood policy and of its claim to be a first responder in the region. The August 26 floods, and the earlier precedent of the 2015 earthquake response, allow a candidate to discuss whether relief converts into durable influence, which is precisely the kind of evaluative question GS2 asks.

Prelims nuggets

  • The India-Nepal Treaty of Peace and Friendship was signed in 1950 and provides for national treatment for the nationals of each country in the territory of the other in matters of residence, property, trade and movement.
  • The Treaty of Sugauli, 1816, concluded after the Anglo-Nepalese War, fixed the Kali river as the western boundary of Nepal; the Kalapani, Lipulekh and Limpiyadhura dispute concerns the identification of the source of that river.
  • The Mahakali Treaty of 1996 governs the integrated development of the Mahakali river, including the Sarada Barrage, the Tanakpur Barrage and the Pancheshwar Multipurpose Project.
  • Article 125 of the UN Convention on the Law of the Sea recognises the right of access of land-locked states to and from the sea and freedom of transit, on terms to be agreed with transit states.
  • The Asian Infrastructure Investment Bank commenced operations in 2016 and is headquartered in Beijing; China is the largest shareholder and India the second-largest.
  • Nepal promulgated its present Constitution in 2015, establishing a federal democratic republic with seven provinces and a bicameral federal parliament comprising the House of Representatives and the National Assembly.
  • Nepal is a member of SAARC, whose secretariat is at Kathmandu, and of BIMSTEC, whose secretariat is at Dhaka, as well as of the BBIN sub-regional grouping with Bangladesh, Bhutan and India.

Analysis

  1. This reset is being driven by a balance sheet, not by sentiment. A reconstruction requirement above $5 billion in an economy of Nepal's size cannot be met from domestic revenue, and Mr. Wagle's itinerary states the strategy plainly: New Delhi first, then the AIIB board at Doha, then the IMF and the World Bank at Bangkok, then an appeal at the General Assembly. India is one stop among several, and its comparative advantage is not the size of its purse but proximity, speed of delivery and the fact that relief material can move overland the same week. An Indian policy that competes on headline numbers will lose; one that competes on disbursement speed will not.
  2. Overflight is the single best test of whether the reset is real. Nepal built two international airports, at Bhairahawa and Pokhara, and cannot service the debt on them because India has not permitted bi-directional flights using the nearer air entry routes. India has technical and security considerations for controlling entry points into its airspace, and those considerations are not manufactured. But the cost of the impasse falls entirely on Nepal's exchequer, which means that in Kathmandu the issue is read as leverage whether or not it is intended as leverage. If the Shah visit produces movement on nothing else, movement here would be worth more than a dozen memoranda, precisely because it costs India something.
  3. The flood did to Chinese connectivity what Indian policy could not. The Trishuli overflowed on both sides of the Nepal-China border and destroyed the crossing at Rasuwa, one of the principal overland links between Nepal and Tibet. That is a temporary, physical, wholly accidental restoration of Indian transit primacy. It is worth saying openly that such an advantage decays: Beijing rebuilds infrastructure quickly, and an India that treats a washed-out road as strategic breathing space rather than as a deadline will find the space gone in two seasons.
  4. Naming the irritants is progress, but neither of them has a solution on the table. The reported causes of the trouble of recent years are boundary disputes and economic issues. The boundary question is now embedded in Nepal's Constitution through the 2020 map amendment, which raises the political cost of any Nepali climbdown to a level no coalition can pay; the economic questions run through transit, trade deficits and the air-route problem. A reset that improves atmosphere without touching either is a reset that will need to be performed again after the next election.
  5. A new party changes the interlocutor, not the incentives. The Rashtriya Swatantra Party came to office as an anti-establishment force, and the cancelled Foreign Secretary-level visit in May showed how quickly an early misstep can stall engagement. Nepali domestic politics has long rewarded visible distance from New Delhi, and the surest way for India to damage the present opening is to advertise it as a win. The correct posture is deliberately unglamorous: deliver the reconstruction support, settle the air routes, and let Kathmandu claim the credit.
  6. Relief buys goodwill that expires; instruments do not. India's recurring difficulty in the neighbourhood is not generosity in a crisis, which it has repeatedly shown, but conversion of that generosity into structure. Flood assistance in September is forgotten by the following monsoon unless it is embedded in something with a life of its own, such as a revised transit treaty, an operational power-trade framework or a settled aviation arrangement. The question to ask of the Shah visit later this year is not how much was announced but how much of it will still exist in 2031.

Possible Mains question

“Every Indian attempt to reset relations with Nepal begins with assistance and ends at the same unresolved questions of boundary, transit and treaty revision.” Critically examine this statement in the light of recent developments in India-Nepal relations. (15 marks, 250 words)

Model approach

  1. Introduction. Open with the structure of the relationship rather than the visit: an open border, a 1950 Treaty granting national treatment, a transit dependence for a landlocked state, and a boundary question now written into Nepal's Constitution. One sentence locating the Jaishankar-Wagle meeting and the forthcoming visit of Prime Minister Balen Shah as the current instance of a recurring cycle.
  2. Body — establish the pattern with evidence. Show the cycle concretely: assistance after a disaster, a warm visit, agreement to “enhance connectivity”, and then the same list of unsettled items. Use the August 26 floods, the reconstruction requirement above $5 billion, and the fact that the overflight question at Bhairahawa and Pokhara has remained open long enough to cause debt-servicing losses.
  3. Body — concede what has genuinely changed. Do not overstate the pessimism. The 2016 Nepal-China transit agreement, the AIIB, and Nepal's direct appeal to multilateral lenders mean Kathmandu now has alternatives it did not have in 1990 or 2015. That changes India's bargaining position and is an argument for settling the small irritants quickly rather than holding them.
  4. Body — separate what India can settle from what it cannot. The boundary question involves a constitutional amendment on the Nepali side and is not amenable to a quick fix; the transit, trade and air-route questions are administrative and are within India's gift. An answer that distinguishes the two, and argues that progress on the second builds the trust needed for the first, is making a policy argument rather than listing grievances.
  5. Conclusion. Conclude that the test of Neighbourhood First is not the speed of relief but the durability of the instruments left behind, and that converting episodic goodwill into a revised transit arrangement, a functioning power-trade framework and a settled aviation regime is the only way to break the cycle the question describes.

Administrator's brainstorm

You are the Joint Secretary handling Nepal. The Ministry of Civil Aviation and the security agencies oppose bi-directional flights to Bhairahawa and Pokhara. Nepal has raised it again. What do you do?

Do not treat it as a binary. Ask the agencies to state, on paper, the specific operational objection to each proposed entry route rather than a general security position, because a written objection can be examined and a general one cannot. Then look for the partial move: a limited number of daily slots, a defined corridor, a trial period with joint review, or a seasonal arrangement — any of which tests the objection in practice at low cost. Carry the political point upward honestly, which is that an issue costing Nepal money every month while costing India nothing is read in Kathmandu as deliberate, and that the reputational cost of the impasse now exceeds whatever is being protected. If the agencies still object after a written examination, say so to the Nepali side clearly rather than letting the file age; an explained refusal damages a relationship far less than an unexplained silence.

You are the District Magistrate of a border district during the flood relief operation. Nepali officials ask you to allow relief trucks through without the usual documentation, and your customs and security staff object.

Distinguish the emergency from the precedent. Use the existing legal route rather than inventing one: request an immediate general exemption or simplified procedure for identified relief consignments through the competent authority, so that what you do is documented and repeatable rather than a personal favour that your successor cannot grant. In the meantime, keep the material moving with a manifest-based clearance and a physical check at a single designated point, which addresses the security concern without stopping the convoy. Put a senior officer at the crossing personally, because the disputes at such moments are minor and resolvable on the spot and become intractable only when referred upward. Record everything; relief operations generate audit questions years later and the officer who kept a clean log is the one who is protected.

An interview board asks you: is the open border with Nepal an asset or a liability?

Answer that it is both, and that the honest position is to say which costs you are willing to bear for which benefits. The benefits are real and large — kinship ties, labour mobility, the everyday economy of the border districts, and a level of people-to-people contact that no visa regime could reproduce. The costs are equally real: the border is used for smuggling, for currency movement and, on occasion, for the transit of persons of security interest. The policy conclusion is not to close it, which would be both impractical and politically damaging, but to invest in the intelligence and enforcement capacity that manages an open border rather than pretending it is a controlled one. A candidate who says only that it is a symbol of friendship has not answered the question.