Indo-Nepal Trade and Investment: An Analysis

Abstract

India and Nepal have traditionally shared a unique relationship of friendship and economic cooperation. The relationship is characterised by an open and people-friendly border and is built on shared historical, cultural, linguistic and ethnic links between people residing in India and Nepal.

With Nepal being a priority under India ‘Neighborhood First’ policy, strengthening the economic relationship holds immense significance and potential for both the countries. While the political relations between India and Nepal have been extensively studied, there is not much literature that explores the economic relationship between the two nations. This is an important issue to study, as India is Nepal’s largest export market, the biggest source of its imports, the top investor of foreign capital stock and among the largest donors of foreign aid. India also provides Nepal transit facility through its territory to access seaports for trading with the rest of the world.

Given this, the main objective of this article is to suggest policy measures, which can increase bilateral trade and investment between India and Nepal. The article analyses the bilateral trade patterns and estimates the maximum additional trade potential. A wide range of issues of importance pertaining to bilateral trade, including tariffs, levy of an agricultural reform fee, under utilisation of the tariff rate quota, non-tariff measures, issues related to Rules of Origin (ROO) and physical barriers to cross-border movement of goods are discussed. The trends and changing sectoral composition of India’s investment in Nepal and barriers and opportunities for Indian investment in Nepal are also analysed. The article concludes by charting a way forward for bolstering economic cooperation between the two countries by listing down recommendations for enhancing trade, addressing non-tariff barriers, upgrading infrastructure to improve connectivity and enhancing Indian FDI in Nepal.

JEL Classification: F10, F13, F15, F50, F53, P45

Keywords

India–Nepal bilateral trade bilateral investment trade in services non-tariff barriers

Introduction

India and Nepal have historically shared strong trade and commercial relations as neighbours in the South Asia region. Even during the times when Nepal faced continuous political uncertainty that created several barriers to trade and investment, India remained the country’s closest commercial partner. India is Nepal’s largest export market, the biggest source of its imports, the top investor of foreign capital stock and is among the largest donors of foreign aid. India also provides Nepal transit facility through its territory to access seaports for trading with rest of the world, since Nepal is a landlocked country bordered by India on three sides.

The cross-border flow of goods between India and Nepal is governed by broadly three main legal instruments:

Bilateral Trade Treaties

Trade between the two countries is governed by the Bilateral Trade Treaty signed in 1971 (and revised in 1991, 1993, 1996, 2002 and 2009), under which India and Nepal offer tariff and other duty concessions on primary and manufactured products imported from each other’s territory. The key features of these treaties are as follows:

For primary products, both countries provided duty-free access on imports of 14 primary products on a reciprocal basis from each other in 1991 and expanded the list to 16 products under the 2009 treaty. However, for import of certain agriculture goods, Nepal levies an Agriculture Reform Fee. This fee is levied at the rate of 5 per cent for 384 items and 8 per cent for 9 items.

In the case of manufactured products, Nepal provides India a rebate in the chargeable customs duty based on ad valorem. This rebate is 5 per cent of the applicable tariff rate of up to 30 per cent and 3 per cent of applicable tariff rate of more than 30 per cent. India receives the rebate on the Nepal’s Most Favoured Nation (MFN) rates for imports and henceforth, it will be referred as the bilateral rate of duty. However, such rebate is not applicable to the goods attracting specific duty.

India’s duty concessions to Nepal on manufactured goods have varied over time. The rules of origin criteria have played an important role in determining the extent of concessions offered by India to Nepal. Under the 1971 treaty, India allowed duty-free access to items manufactured in Nepal with 90 per cent Nepalese/Indian material content for import to India (subsequently reduced to 80% in 1991 and then further to 50% in 1993). In 1996, India provided duty-free access to all products manufactured in Nepal¹ on the basis of a Certificate of Origin and no value-added criteria. The 2002 revision of the treaty re-introduced two conditions for duty-free access of Nepalese products into India: (a) a value addition norm of 30 per cent and (b) requirement that the manufacturing process should lead to a change in classification at the four-digit level of the Harmonised Commodities Description and Coding System. In addition, a tariff rate quota was imposed on four items (vegetable ghee, acrylic yarn, copper products and zinc oxide) under which duty-free access was allowed only up to a specified limit beyond which MFN tariff was applicable. In the 2009 treaty, the tariff rate quota for copper products was increased by 2,500 metric tons (Ministry of Commerce and Industry [MoC], 2002, 2009; Embassy of India, Nepal, 2019).

South Asian Preferential Trade Agreement

The South Asian Preferential Trading Agreement (SAPTA) was an initiative taken by the South Asian Association for Regional Cooperation (SAARC) to augment trade between the South Asian countries through preferential treatment. The agreement came into effect in December 1995 after the conclusion of its first round of negotiations. Overall, it had four rounds of negotiations based on the ‘request and offer’ approach. Under this approach, the exporting countries presented a country-specific list of items (currently being traded as well as potential) on which the party seeks preferential treatment. The importing countries would make an offer on the items from the request list and indicate the extent of concessions. The tariff concessions were guided by the Margin of Preference (MoP). With the help of this approach, each consequent round aimed at increasing the number of products covered and at deepening tariff concessions. At the end of the fourth round of the negotiations, tariff concessions were exchanged for around 5,000 commodities.

In January 2006, SAPTA was superseded by the South Asian Free Trade Agreement (SAFTA). According to Article 22 (Para 1 and 2) of the Agreement on South Asian Free Trade, the concessions granted under SAPTA were to be available to the countries until the Trade Liberalisation Programme under SAFTA was completed. Nepal is yet to undertake complete tariff liberalisation under SAFTA due to which the concessions given under SAPTA are not discontinued. Thus, it leaves the status of SAPTA ambiguous.

South Asian Free Trade Agreement

India and Nepal also offer concessions to each other under the South Asian Free Trade Agreement (SAFTA). Under the SAFTA agreement, Nepal is expected to offer zero duty to all products except on 1,062 items² on the sensitive list. However, Nepal is yet to complete its tariff liberalisation and currently offers zero duty on only a limited number of items. Thus, India is yet to receive zero duty access into Nepal on all items but the sensitive list items.

Additionally, India and Nepal are members of the World Trade Organization (WTO) under which they accord the MFN treatment to each other.³ In accordance with the General Council Decision on Waiver regarding Preferential Tariff Treatment for Least-Developed Countries (WT/L/304–1999), India also provides preferential tariff treatment to products of Nepal. In 2008, India announced a unilateral non-reciprocal tariff preference scheme for the least developed countries known as the Duty Free Tariff Preference Scheme for Least Developed Countries.⁴ Nepal also avails tariff concessions as well as duty-free access for some products under this scheme.

Objectives of the Study

While the political relations between India and Nepal have been extensively studied, there is not much literature that explores the economic relationship between the two nations. Therefore, the main objective of this article is to suggest policy measures, which will increase bilateral trade and investment between India and Nepal.

The key questions posed are as follows:

What additional trade potential is available for the two countries to tap into for enhancing bilateral trade and in what commodities?

What further tariff concessions can India demand from Nepal for its exports, especially in terms of reducing the number of items on Nepal’s SAFTA sensitive list applicable to India?

What are the anomalies under the bilateral agreement and SAFTA? How can these be corrected?

How can the bilateral treaty of trade be modified to make it more relevant to current trends? Is the Tariff Rate Quota still relevant?

What other steps can India take to improve Nepal’s market access into India in terms of addressing the non-tariff barriers facing Nepalese exports to India?

What steps can India take to improve its market access to Nepal in terms of addressing non-tariff barriers faced by Indian exporters?

What measures can help enhance India’s investment flows into Nepal?

The study makes use of ‘mixed methods’, based on secondary sources and primary information collected through stakeholder’s consultations. Secondary sources include published papers, reports, books, customs tariff manuals, government policies, agreements, regulations and protocols. Secondary data on India’s trade with Nepal has been collected from the Directorate General of Foreign Trade (DGFT), Ministry of Commerce and World Integrated Trade Systems (WITS) Database published by the World Bank. Stakeholder consultations were conducted with importers, exporters, freight forwarders, clearing agents, government officials and academics on various issues at different points in time during 2017–2018, both in India and Nepal.

The article is organised as follows: the first section of the article analyses the bilateral trade patterns of India and Nepal along with their maximum additional potential. The second section examines the issues faced by India’s export to Nepal and the third section examines the issues facing India’s imports from Nepal. The fourth section analyses the physical barriers to cross-border movement of goods between India and Nepal. It is followed by the fifth section, which focuses on India’s FDI in Nepal. Finally, the sixth section provides the concluding observations and the way forward.

Trade Patterns and Potential

India has had a trade surplus with Nepal since 2002–2003, which has been growing over the years. The average trade balance ratio increased from 40 per cent in the period 2002–2003 to 2009–2010 to 76 per cent in the period 2010–2011 to 2018–2019, reflecting India’s expanding trade surplus (Table 1).

In 2018–2019, India’s top exports to Nepal at the HS-6 classification of items included petroleum oil and oils from bituminous minerals, light oils, milled rice, motor cycle parts, semi-finished products of iron or non-alloy steel, cement clinkers and medicines (Table 2).

Table 1.

India’s Trade with Nepal (US$ million)

Year	Export to Nepal	Import from Nepal	Total Trade	Trade Balance	Trade Balance Ratio (%)
2002–2003	350	282	632	69	11
2003–2004	669	286	955	383	40
2004–2005	743	346	1,089	397	36
2005–2006	860	380	1,240	480	39
2006–2007	927	306	1,233	621	50
2007–2008	1,507	629	2,136	879	41
2008–2009	1,570	496	2,066	1,074	52
2009–2010	1,533	453	1,986	1,081	54
2010–2011	2,168	513	2,682	1,655	62
2011–2012	2,722	550	3,272	2,172	66
2012–2013	3,089	543	3,632	2,546	70
2013–2014	3,592	530	4,122	3,062	74
2014–2015	4,559	640	5,199	3,919	75
2015–2016	3,930	471	4,401	3,460	79
2016–2017	5,454	445	5,899	5,009	85
2017–2018	5,518	414	5,932	5,104	86
2018–2019	7,766	508	8,274	7,258	88

Source: Directorate General of Foreign Trade, Ministry of Commerce, Government of India.

In 2018–2019, India’s top imports from Nepal at the HS-6 classification of items included refined palm oil, flavoured water, cardamoms, articles of plastic, tea, fabrics, etc. (Table 3).

Table 2.

India’s Top 10 Exports to Nepal in 2018–2019

Hs Code	Commodity	Values in US$ Million
271019	Other petroleum oils and oils obtained from bituminous minerals, etc.	1,166
720719	Other products containing by wt < 0.25% of carbon	532
271012	Light oils and preparations	286
271119	Other in gaseous state	253
100630	Semi/wholly milled rice w/n polished/glazed	221
871120	Motor cycle, etc. with reciprocating internal combustion piston engine of cylinder capacity > 50 cc to 250 cc	182
720839	Flat rolled products in coils of a thickness of < 3 mm	142
721391	Bars and rods, hot rolled of iron/non-alloy steel	141
271600	Cement clinkers	134
300490	Other medicine put up for retail sale	132

Source: Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India.

Table 3.

India’s Top 10 Imports from Nepal in 2018–2019

HS Code	Commodity	Values in US$ Million
151190	Refined Palm oil and its fractions	45
220299	Other sweetened flavoured waters	43
090831	Cardamoms: Neither crushed nor ground	32
392690	Other articles of plastics	31
090240	Other black tea and other partly fermented tea:	29
531010	Unbleached woven fabrics of jute/other textile bast fibres	25
630510	Sacks and bags for packing, made of jute or of heading no. 5303	22
721720	Wire of iron/non-alloy steel, plated/coated with zinc	21
721041	Corrugated products, otherwise plated or coated with zinc	19
380610	Resin and resin acids	15

Source: Directorate General of Foreign Trade, Ministry of Commerce and Industry, Government of India.

The study has also attempted to estimate the maximum additional trade potential that exists between India and Nepal. Trade potential is defined as the trade that could be achieved at an ‘optimum trade frontier’ in the case of open and frictionless trade given current trade, transport and institutional technologies or practices (Armstrong, 2007; Drysdale, Huang, & Kalirajan, 2000; Kalirajan, 2007). There exists a gap between potential and actual trade, which is associated with various socio-political and institutional factors that may be hindering the actual trade to grow to the upper limit of the production frontier. It is of significant importance to know the trade potential that exists between two countries so that they can engage in negotiation processes or undertake reforms to minimise or partially mitigate the effect of existing restrictive measures to trade growth.

Following the methodology followed in Taneja, Mehra, Mukherjee, Bimal, and Dayal (2013), additional trade potential is estimated using the ‘trade possibilities approach’. Trade possibilities are determined by the exporting country’s supply capabilities and importing countries’ demand capabilities. Trade possibilities are defined to exist in items that the two countries can import from each other instead of from elsewhere in the world. In order to identify items having trade potential and assess the magnitude of trade possibilities (referred to as trade potential) between the two countries, products having trade potential are identified as those with (a) adequate demand in the receiving country and (b) adequate supply capabilities in the source country.

Potential trade for any commodity is given by Min (SE, MI) – ET where SE, MI and ET are supplier’s global exports, receiver’s global imports and existing trade between the supplier and the receiver. The exercise is conducted by first posing India as a supplier for calculating India’s export potential to Nepal and then by posing Nepal as the supplier country for calculating Nepal’s export potential to India.⁵

The results of the exercise show the existence of an estimated additional trade potential of around US$4 billion if the two countries were to import from each other what they import from the rest of the world (Table 4). Of this total trade potential, India’s export potential to Nepal accounted for US$3.71 billion and its import potential from Nepal accounted for US$0.17 billion (Table 4).

The trade potential figures suggest that while there is a vast untapped potential to expand India’s exports to Nepal (US$3.71 billion), there is limited scope for Nepal to expand its exports to India (US$170 million). It, therefore, seems unlikely for Nepal to be able to reduce its trade deficit with India

On further analysing India’s export potential to Nepal, it was found that 31 per cent of the total additional export potential can be attributed to the items on Nepal’s sensitive list with a value of US$1,147 million. The remaining 69 per cent can be attributed to the items that are not on the sensitive list, with a value of US$2,568 million (Table 5)

Table 4.

Total Additional Trade Potential between India and Nepal (US$ Million)

	India’s Export to Nepal	India’s Import from Nepal	Total Trade
Current trade	4,518	385	4,903
Maximum additional total trade potential	3,715	170	3,963

Source: Authors’ calculations based on UNCTAD–WITS data.⁶

Note: All above figures based on 2016 data.

Table 5.

India’s Additional Export Potential to Nepal

Export Potential	Values in US$ Million	Share (%)
Max. Additional Export Potential for Sensitive List Items	1,147	31
Max. Additional Export Potential for Non-Sensitive List Items	2,568	69
Max. Additional Total Export Potential	3,715	100

Source: Authors’ calculations based on WITS database.

Issues Facing India’s Exports to Nepal

India’s Export Potential and Tariffs Under Bilateral Treaty and SAFTA

The top 10 products (at HS-6 level) with the largest export potential from India to Nepal are semi-finished products of iron or non-alloy steel, cellular phones, petroleum oils and oils obtained from bituminous minerals, homeopathic medicines, cement clinkers, mechanical shovels, vehicles, polyethylene and semi-milled or wholly milled rice aircrafts (Table 6).

Out of these 10 high-potential items, 3 items are on Nepal’s sensitive list, that is, they do not receive a preferential rate of duty under SAFTA but receive bilateral rebates given to India on Nepal’s MFN rates. Of the remaining seven non-sensitive items, four are subjected to a higher rate of duty under the bilateral agreement between India and Nepal than that offered under the SAFTA agreement (Table 6). The bilateral rate of duty for India is determined by applying the bilateral rebate on Nepal’s MFN tariffs. This rebate is 5 per cent of the applicable tariff rate of up to 30 per cent and 3 per cent of applicable tariff rate of more than 30 per cent.

The exercise of identifying items with the highest potential was extended to include top 50 items at the HS-6 level of classification. These items when expanded at the 8-digit level covered 83 items (Table A1). An examination of the tariff rates applicable to these 83 items with export potential items from India to Nepal indicates that there is an ‘anomaly’ in the imposition of tariff rates under SAFTA and the Indo-Nepal bilateral trade treaty. For 17 items, the duty applicable under the bilateral trade treaty is higher than the SAFTA rate (Table 7). This anomaly needs to be addressed so that India gets the benefits of SAFTA under its bilateral trade agreement.

Levy of the Agricultural Reform Fee

While the Bilateral Trade Treaty provides duty-free access to each other’s primary products as the agreed list, Government of Nepal levies Agriculture Reform Fee at the rate of 5 per cent on import of primary products from India. When Nepal became a member of the World Trade Organisation (WTO) in 2004, it had made a commitment to eliminate the duty in 10 years. However, this fee continues to be levied. Since 2014, the Government of India has been raising the issue of eliminating ‘Other Duties and Charges’ (ODCs) during the Intergovernmental Committee Meeting (IGC). But Nepal had sought an extension to eliminate tax, citing the adverse impact of a devastating 2015 earthquake on the economy (The Himalayan Times, 2018).

Table 6.

Items with Highest Export Potential from India to Nepal

HS Code (at 6 digit)	HS Code (at 8 digit)	Product Description	Export Potential in 2016 (Values in US$ million)	Included in Sensitive List	SAFTA Rates	MFN	Bilateral Rate of Duty for India (MFN rate minus rebate)
720719	72071900	Containing by weight less than 0.25% of carbon	217.43	No	5	5	4.75
851712	85171200	Telephone sets, including telephones for cellular	192.21	No	Free	Free	–
271019	27101910	Petroleum oils and oils obtained from bituminous (kerosene)	131.44	Yes	Per kL ₹2,000	Per kL ₹2,000	–
	27101920	Aviation turbine fuel			Per kL ₹2,100	Per kL ₹2,100	–
	27101930	High speed diesel			Per kL ₹2,000	Per kL ₹2,000	–
	27101940	Light diesel oil			Per kL ₹440	Per kL ₹440	–
	27101950	Fuel oil (furnace oil)			5	5	4.75
	27101960	Base oil (to be used in the manufacturing of lubricants)			30	30	28.50^b
	27101970	Jute batching oil and textile oil			15	15	14.25
	27101980	Lubricating oil			30	30	28.50
	27101991	Spindle oil			15	15	14.25
	27101992	Transformer oil			15	15	14.25
	27101993	Mineral Turpentine oil			15	15	14.25
	27101994	Rubber Processing oil			20	20	19.00
	27101995	White oil			15	15	14.25
	27101999	Other			30	30	28.50
300390	30039010	Other; homeopathic medicaments (pure ayurvedic and Yunani)	101.80	No	9	10	9.50^c
	30039040	Battisa, Drakshasab, Trifala…			9	10	9.50
	30039090	Other			14	15	14.25^c
252310	25231000	Cement clinkers	63.93	Yes	Per MT ₹2,400	Per MT ₹2,400	–
842959	84295900	Mechanical shovels, excavators and shovel loaders…	60.36	No	5	5	4.75
870323	87032300	Other vehicles, with spark-ignition internal combustion	50.27	Yes	80	80	77.60
390120	39012000	Polyethylene having a specific gravity of 0.94	45.62	No	6	10	9.50
100630	10063000	Semi-milled or wholly milled rice, whether or not	42.63	No	9	10	9.50^d
880230	88023000	Aeroplanes and other aircraft, of an unladen weigh	41.51	No	6	10	9.50^e

Source: Authors’ calculations based on Nepal’s Customs Tariff Manual.

Notes: ^a Nepal’s sensitive list as given by SAARC Secretariat.

^b Under partial exemption of customs duty, only 15% customs duty is charged on import of base oil of sub-heading HS Code 27101960 when imported by the registered industry with the purpose of producing grease and lubricating oil.

^c Under partial exemption of customs duty, only 5% customs duty is charged on medicines falling under chapter 30 (HS Code 3009010 and HS Code 3009090).

^d Full consumption in the customs duty is granted for the good (HS Code 100630) when imported from India. However, an Agriculture Reform Fee (@8%) is charged for this good.

^e Aircraft of subheading HS Code 88023000 imported by the airline service operator or the company licensed by the Civil Aviation Authority.

Table 7.

Comparison of Applicable Rate of Duty Under SAFTA and Indo-Nepal Bilateral Agreement

Tariff Rates	Number of Items
Zero duty	9
Specific duty	10
SAFTA duty is more than bilateral rate of duty	47
Bilateral rate of duty is more than SAFTA duty	17
Total	83

Source: Authors’ calculations based on Nepal’s Customs Tariff Manual.

Note: The top 50 items at the HS-6-digit level have been further disaggregated at the HS-8-digit level which resulted into a total of 83 tariff lines.

India could negotiate the removal of this duty, in future, at least on the agricultural items on which customs duty has been exempted under the bilateral trade treaty.

Competition from Chinese Exports

There is a general perception that India faces a looming threat from the growing dominance of China in Nepal’s domestic markets. However, data shows that even though China’s share in Nepal’s imports increased from 11 per cent in 2010 to 13 per cent in 2017, India’s share also increased from 64 per cent to 65 per cent during the same period. Therefore, India continues to be the largest exporter of goods to Nepal (Table 8). It can be seen that both India and China competed to take away market share from other exporters such as UAE, Indonesia and Thailand, who saw a drop in their share of Nepal’s imports (Table 8).

Non-tariff Measures Faced by India’s Exports to Nepal

According to UNCTAD (2010), non-tariff measures (NTMs) are defined as ‘policy measures, other than ordinary customs tariffs, that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices or both’. NTMs cover a diverse set of measures in terms of purpose, legal form and economic effect. When these measures are imposed in a restrictive manner, they are often referred to as ‘barriers’ to trade.

Table 8.

Nepal’s Top Import Partners

Year	2010		2017
Partner Name	Value (US$ mn)	% of Total Imports	Value (US$ mn)	% of Total Imports
India	3,253	64	6,520	65
China	561	11	1,267	13
UAE	194	4	175	2
Indonesia	107	2	121	1
Thailand	102	2	108	1

Source: UNCTAD–WITS database.

Indian exporters have often complained about facing non-tariff barriers while accessing the Nepal market. The objective of this section is to identify non-tariff barriers faced by Indian exporters to Nepal. Based on the survey of existing literature, two products—pharmaceutical products and cement—are identified for the analysis.

In the case of export of pharmaceutical products, a study by Taneja (2018) reports that Indian exporters find it difficult to meet the technical requirements (TR) because of the complex regulations related to authorisation requirements and regulations on production processes. The process for obtaining authorisation and product registration is time-consuming and there are substantial delays. For authorisation to export to Nepal, the Indian exporter must pay NPR 50,000 and register the company with the Drug Development Administration (DDA), Nepal. A majority of Indian pharmaceutical exporters felt that the requirements were too detailed and there were substantial delays in obtaining authorisation from the DDA. The good manufacturing practice (GMP) of the World Health Organization must be followed by manufacturers exporting pharmaceutical products to Nepal. In order to ensure compliance, DDA inspectors visit the site factory in India and for each visit, Indian exporters have to pay US$1,500.

The Nepalese authorities recognise pharmaceutical products produced in countries that are members of the Pharmaceutical Inspection Convention (PIC) and the Pharmaceutical Inspection Co-operation Scheme (PIC Scheme), which, together, are known as the PIC/S.⁷ The Nepalese authorities do not conduct any tests of manufacturing facilities or processes associated with products from PIC/S member countries. Because India is not a member of the PIC/S, the authorities in Nepal conduct inspections of manufacturing facilities.

In the case of export of cement, it was reported that Nepal has instituted a complete ban on the import of Portland Pozzolana Cement (PPC) grade cement manufactured by ACC Ltd. The ban was imposed on the basis of the ‘fly ash’ component of the cement. The PPC cement by ACC Ltd had ‘fly ash’ component equivalent to 30.1 per cent, which is more than the limit of 15 to 25 per cent as stipulated by the Nepal Bureau of Standards (NBS). However, Associated Cement Companies Limited (ACC Ltd)’s cement is in accordance to the BIS standards, which allows the ‘fly ash’ content to vary between 15 and 35 per cent (IGC, 2016).

Issues Facing India’s Imports from Nepal

Import Potential from Nepal

Calculating the value of additional import potential for India to import from Nepal at the HS-six-digit disaggregated level shows that there is only a small, that is, US$170 million, worth of additional goods that Nepal can potentially export to India (Table 9), which is less than half of the current imports, amounting to US$385 million. This gives an indication that products that Nepal is exporting to other countries do not have a demand in India (as they are not being imported into India from other countries as well).

Table 9.

Top Items with Import Potential from Nepal (US$ Million)

Hs Code	Product Description	Nepal’s Exports to India	India’s Import Potential	Included in India’s Sensitive List
490700	Unused postage/revenue stamps	0	35	No
71340	Lentils	0.7	13	No
650500	Hats and other headgear	0	5	No
550921	Yarn other than sewing thread	9	5	No
620462	Trousers/breeches	0	4	No
230910	Dog/cat food	0	4	No
970110	Paintings, drawings and pastels	0	4	No
410621	Hides and skins of goats or kids	0.1	4	No
701310	Glassware of glass-ceramics	0	3	No
620442	Dresses of cotton	0	3	No
Total (top 10)		10	79
Total		385	170

Source: Authors’ calculations using UN ITC-WITS database.

Note: India’s sensitive list as given by SAARC Secretariat

Underutilisation of the Tariff Rate Quota

The 2002 revision of the Bilateral Trade Treaty imposed a tariff rate quota on four items—vegetable ghee, copper products, acrylic yarn and zinc oxide. Duty-free access of these goods imported from Nepal into India was allowed only up to a specified quota limit, beyond which MFN tariff is applicable. The quota, however, has remained grossly underutilised (Table 10). For example, in 2007–2008, the utilised quota was 45.3 per cent for copper products, 47.5 per cent of vegetable ghee, 20.3 per cent for acrylic yarn and zero for zinc oxide (Taneja & Chowdhury, 2010). In 2017, the utilised quota was 23 per cent for acrylic yarn, 12 per cent for copper products and zero of vegetable ghee and zinc oxide (Table 10). In 2001–2002, these ‘Tariff Rate Quota (TRQ) products’ accounted for 29.7 per cent of India’s imports from Nepal, but by 2017–2018, the combined share of these products has decreased to 9 per cent. Given the low quota utilisation rates, India may consider removing the quota requirement.

Table 10.

India’s Imports of TRQ Products from Nepal (Metric Tonnes) and Quota Utilisation (%)

Items	2010		2012		2014		2015		2017
Items	Volume	Quota Used*	Volume	Quota Used*	Volume	Quota Used*	Volume	Quota Used*	Volume	Quota Used*
Veg fats	0	0	0	0	0	0	0	0	0	0
Acrylic	1,600	16	200	2	2,700	27	4,600	46	2,300	23
Zinc oxide	0	0	0	0	0	0	0	0	0	0
Copper product	2,800	28	1,000	10	2,000	20	2,200	22	1,200	12

Source: Authors’ calculations using World Integrated Trade Solutions.

Notes: * The applicable quotas (in metric tons): Vegetable fats: 100,000 MT, Acrylic yarn: 10,000 MT, Zinc oxide: 2,500 MT and Copper products: 10,000 MT (2,500 MT after 2009).

High ROO Criteria Under Trade Treaty

Two preferential agreements govern India’s imports from Nepal: The Treaty of Trade between the Government of India and the Government of Nepal and the Duty-Free Tariff Preference (DFTP) Scheme for LDCs. Under the Treaty of Trade, Nepalese exports to India are subjected to a change in classification, at four-digit HS Level and that the total value of materials, parts or produce originating from non-Contracting Parties or of undetermined origin used, does not exceed 70 per cent of the FOB price of the articles produced. Under the DFTP Scheme, the imports from Nepal have to go through a change in tariff heading at the six-digit HS level between the imported raw materials and the finished products. Besides, the process should have generated a value addition of 30 per cent in the exporting country. Thus while the domestic content requirement is the same under both the Agreements, the change of heading requirement at a 4-digit HS classification level is more stringent than the requirement of a change in tariff heading at the 6-digit level under the DFTP scheme.

On comparing India’s preferential treatment to Nepal with that offered by China, it is found that China, under the Duty-free Treatment, subjects Nepal to either a change of tariff classification at four-digit HS level or an ad valorem percentage of no less than 40 per cent. It does not apply both the criteria simultaneously as in case of India. Whereas the goods listed in the ‘Product Specific Rules’ (PSR) are not subject to the said criterion. If goods have not been wholly obtained or produced in the beneficiary country, but meet the product-specific rules issued by the General Customs Administration of China, they are considered to originate from the beneficiary countries. So far, no such rules have been issued (UNCTAD, 2016).

Nepal has been demanding a relaxation of India’s stringent Rules of Origin criteria of domestic value addition to a maximum of 25 per cent based on the 10th WTO Ministerial Conference held in Nairobi in 2015. The Nairobi Decision on Preferential Rules of Origin for LDCs sets out a set of multilaterally agreed guidelines to help make it easier for LDC exports to qualify for preferential market access granted by WTO members in favour of LDCs. One of the decisions regarding requirements for the assessment of sufficient or substantial transformation requires members to consider allowing the use of non-originating materials up to 75 per cent of the final value of the product (World Trade Organisation, 2015, December 15–19). These mutually agreed guidelines are to be further discussed in the following conferences and are yet to be made mandatory for countries.

Non-tariff Measures Facing Nepal’s Exports to India

Nepalese exporters have often complained about facing non-tariff barriers while accessing the Indian market. Based on the survey of existing literature, it is found that exporters do not find it difficult to meet standards but there are problems related to information flows and procedural and infrastructural bottlenecks. The key impediments that reportedly hamper Nepal’s exports to India are listed down⁸:

Lack of awareness: For agricultural items such as medicinal plants, it has been found that neither exporters in Nepal nor importers in India are aware about the requirement or the regulations related to pest risk analysis.

Dependence on government laboratories for testing: Even though there are several National Accreditation Board for Testing and Calibration Laboratories (NABL)-accredited and the Food Safety and Standards Authority of India (FSSAI)-notified private laboratories in India, for cross-border trade, there is dependence on only government laboratories. This results in undue delays in testing and adds to the transaction costs.

Lack of testing facilities: There are a limited number of testing facilities, particularly close to the land borders. As a result of this, samples have to be sent to Kolkata, which adds to the transaction cost and time of trading.

Lack of Electronic Data Interchange (EDI) facilities: So far, EDI is operational between India and Nepal only in Jogbani and Raxaul. Single-window systems at national levels have enabled greater coordination among agencies, thereby reducing transaction costs for traders. The FSSAI has been included in the single-window system and has introduced risk profiling to enable the system to identify high-risk consignments electronically. In general, EDI can enhance risk profiling and are a prerequisite for single-window systems. Thus, the absence of EDI and single-window inhibits risk profiling and random checking of consignments, which is a major infrastructure impediment.

Lack of coordination among the agencies: While NABL had accredited laboratories in Nepal, FSSAI has not notified these laboratories. Lack of coordination among regulatory agencies has led to this problem.

It can be inferred that most of the issues arise from lack of information on regulations and standards and inadequate infrastructure for measuring and certifying quality, rather than protection by India. It therefore becomes necessary to address burdensome NTMs by distinguishing between real and perceived complaints, thereby focusing the attention of policy makers on genuine issues; dealing with the misperceptions of traders; and, ultimately, bridging the gap between perceptions and objective evidence.

Physical Barriers to Cross-Border Movement of Goods

India has 27 trading points with Nepal along the Indo–Nepal border. However, the Land Customs Stations at these border points lack adequate infrastructure, which acts as an impediment to the Indo–Nepal bilateral trade. Logistic bottlenecks have long caused delays and inefficiencies for freight transport between Nepal and India. These barriers impact both countries.

Even as infrastructure plays an important role in facilitating bilateral trade, only a limited number of studies have been conducted to gauge the gaps. Out of 27 trading points identified in the India–Nepal treaty (2009), limited studies have been carried out covering only two land customs stations, namely Panitanki–Kakarbhitta and Raxaul–Birgunj. By contrast, there have been a number of studies, which have been carried out on Nepal’s transit through India covering containerised rail cargo. The detailed studies have helped the two governments of India and Nepal to resolve a number of issues related to transit trade.

A study by CUTS International and Centre for Policy Research (2016) analysed the infrastructural bottlenecks present at the Panitanki–Kakarbhitta Land Customs Station (LCS). At the LCS, trade is conducted by traditional processes with no trade-supporting infrastructure like weighment bridge, cold storage, etc. Lack of capacity, adequate personnel, coordination and cooperation between various agencies and outdated infrastructure hamper the overall performance. The LCS also lacks testing facilities, which necessitates test to be done in faraway Kolkata.

At the Raxaul–Birgunj border, an Integrated Check Post for handling road cargo became operational in 2018. Bose (2018) points out that while this has led to shorter queues of trucks at the outskirts of Raxaul town, cargo clearance continues to get delayed, as the shipping bills reach a few days after the arrival of cargo. There is ambiguity about the old LCS, as Bose (2018) reports that some cargo carrying oil and cement continues to get cleared at the old LCS, necessitating movement of trucks through Raxaul town. Also it is not clear whether the new ICP has adequately addressed all the infrastructure problems.

Thus, of the 27 trading points, there is not enough information on the infrastructure gaps at these points. It is important to examine the trade flows through these points, assess the adequacy and quality of infrastructure at these points and suggest how these can be upgraded.

India’s FDI in Nepal

India was among the only investors in Nepal during the 1970s and 1980s, when total FDI flows to Nepal were minimal or even negative, averaging US$0.5 million annually. India’s investments stepped up significantly in the 1990s, although total flows remained small, averaging US$8.3 million per annum during 1990–2000. Indian FDI fell during the 2000–2009 period, but increased nearly three times after 2010. The total FDI into Nepal also increased from a US$19.1 million per annum during 2001–2010 to average around US$92 million per annum during 2011–2018 (UNCTAD, 2019a).

India has been the largest source of foreign direct investment in Nepal, accounting for nearly 30 per cent of the total FDI received. As per the Reserve Bank of India, Nepal received a cumulative FDI of US$116.2 million from India for the period from 2007–2008 to 2018–2019 (Table 11).

As far as the origin of FDI is concerned, Nepal has received FDI from 39 countries until 2016 (Nepal Rastra Bank, 2018). Apart from West Indies (a tax haven through which investments are routed), the largest portion of the total FDI stock is from India, followed by China and Singapore (Table 12). But in recent years, Chinese FDI in Nepal has been growing significantly. As per reports released by Department of Industry (DoI), China has overtaken India in terms of its FDI commitment in Nepal in the two consecutive fiscal years, 2016–2017 and 2015–2016. According to DoI Statistics, China contributed to around 87 per cent of FDI commitments received by Nepal during the first 10 months of the fiscal year that began in mid-July 2017. FDI commitments from India stood second followed by commitments from the USA, Japan and South Korea.

Table 11.

India’s Cumulative FDI in Nepal (values in US$ million)

Years	FDI Value
July 2007–2008	4.07
2008–2009	4.70
2009–2010	6.39
2010–2011	9.08
2011–2012	14.38
2012–2013	17.46
2013–2014	9.76
2014–2015	2.37
2015–2016	5.38
2016–2017	3.08
2017–2018	20.92
2018–2019	18.6

Source: Overseas Investment Data, Reserve Bank of India.

Table 12.

Stock of FDI by Countries and Sectors in Mid-July 2016 (values in ₹ million)

Sr. No.	Countries	Agriculture	Industry	Service	Total
1	West Indies	–	–	62,780	62,780
2	India	104	16,905	10,245	27,254
3	China	–	9,201	1,643	10,844
4	Singapore	113	6,286	736	7,135
5	Ireland	–	–	5,805	5,805
6	Australia	–	–	3,832	3,832
7	South Korea	16	2,770	119	2,905
8	Bangladesh	–	–	2,510	2,510
9	UK	–	223	2,108	2,331
10	USA	127	785	1,416	2,328
11	Others	35	4,449	5,473	9,956
	Total	395	40,618	96,666	137,678

Source: Nepal Rastra Bank (2018).

Looking at the sector-wise composition of India’s investments in Nepal, 55 per cent of the total was invested in the services sector and 44 per cent in the manufacturing sector. Indian investment in the agriculture sector has continued to be negligible. To assess the trend in the sectoral-distribution of FDI, we analyse the data on FDI flows from 2008 to 2019, by dividing into two periods—2008–2009 to 2012–2013 (period 1) and 2013–2014 to 2018–2019 (period 2). Between these two periods, the share of India’s FDI in financial, insurance, real estate and business services has risen significantly, from a share of 1 per cent in period 1 to a share of 26 per cent in period 2 (Table 13). A large part of the rise can be attributed to the US$14 billion investment made by the State Bank of India in period 2. The share of wholesale, retail trade, restaurants and hotels has dropped from 28 per cent in period 1 to 8 per cent in period 2. The share of manufacturing sector FDI also rose from 39 per cent in period 1 to 49 per cent in period 2.

Table 13.

India’s Sector-wise FDI in Nepal (Values in US$ Million)

Sectors	Period 1 2008–2009 to 2012–2013		Period 2 2013–2014 to 2018–2019		Cumulative 2008–2009 to 2018–2019
Sectors	FDI	Share (%)	FDI	Share (%)	FDI	Share (%)
Manufacturing	20	39	30	49	50	44
Wholesale, retail trade, restaurants and hotels	14	28	5	8	20	18
Financial, insurance, real estate and business services	0	1	16	26	16	14
Electricity, gas and water	5	10	5	8	10	9
Construction	9	16	0	0	9	8
Community, social and personal services	3	6	4	7	7	6
Agriculture and mining	0	0	1	2	1	1
Transport, storage and communication services	0	0	0	0	0	0
Total FDI	52	100	61	100	113	100

Source: Overseas Investment Data, Reserve Bank of India.

Barriers and Opportunities for Investment in Nepal

Until now, the flow of Indian FDI into Nepal was significantly driven by the bilateral trade agreement that incentivised several Indian companies to establish their commercial presence in Nepal to exploit the investment–trade nexus. The geographical proximity as well as shared historical and cultural ties have also made the flow of foreign investment more amenable (Adhikari, 2013). The low labour costs and gradual liberalisation of Nepal’s trade and economic policies resulting in low tariff rate structure have been an added advantage for Indian firms (Jha, 2018).

However, the political uncertainty and slow-growing economy posed as disincentives for investments. FDI flows from India to Nepal are subjected to various policy-related barriers such as lack of harmony between different FDI governing authorities, problems concerning land acquisition, disruptive activities of labour unions, tax concerns such as no tax rebates on profits that get reinvested, rampant corruption, infringements of copyright, trademark and patent of international brands and insufficient infrastructure. In 2011, India and Nepal initiated a Bilateral Investment Promotion and Protection Agreement (BIPA). The purpose of the agreement was to stimulate foreign investments by reducing political risks and enhancing bilateral investments. However, the BIPA between India and Nepal was rather seen as a hindrance to FDI investments and was never ratified. In March 2017, India unilaterally denounced the BIT and terminated it (UNCTAD, 2018b). The termination was based on India’s decision to bring out a new BIT model in 2015 to replace the existing Bilateral Investment Promotion and Protection Agreements (BIPAs) (Mishra, 2017)

In the last few years, the Government of Nepal has adopted multiple open and liberal policies to lure foreign investors. The Industrial Enterprises Act and Foreign Investment and Technology Transfer Act (FITTA) of 1992 initially paved the way towards inward FDI throughout the Nepalese economy. However, the FITTA had several shortcomings and was not compatible with the changing scenarios of global FDI investments, which prevented FDI flows to reach their potential values. The GoN introduced new Foreign Investment Policy, 2015, by replacing the policy of 1992, with an objective of making the economy more dynamic and competitive.

In contrast to the old policy, the new policy has clearly defined the term ‘foreign investment’ and ‘technology transfer’. There are provisions to facilitate FDI through the access to foreign exchange, facilities and exemptions, access to credit, hiring foreign workers, acquisitions of land, and industrial security and business promotion. It assures equal treatment to foreign investors, no nationalisation of the investment and withdrawal of their principal investment and its earnings. The provision of mediator and dispute settlement has also been incorporated in this policy.

In April 2018, GON has also adopted the concept of facilitating foreign investment in Special Economic Zone (SEZ) to promote the country’s exports (Special Economic Zone Authority Nepal, 2018). The SEZ Authority Act – 2016 envisions the establishment of SEZ Authority to construct or maintain physical infrastructure in the SEZ; monitor and regulate industries established in the SEZ; and provide one stop service. Foreign investors are allowed and given tax holidays and other concessions to establish, operate and manage the special economic zone.

Policy Recommendations

From the above assessment of the trends and issues facing trade and FDI flows, it can be seen that India has been Nepal’s closest economic and commercial partner, but emerging issues need to be addressed for the two countries to engage beneficially in future. The following recommendations could help the two countries:

The following is a summary of the main recommendations for the way forward:

Recommendations for enhancing trade:

Address the ambiguity under SAPTA: The concessions under SAPTA were to cease following the completion of the SAFTA process. As Nepal is yet to complete the tariff liberalisation process under SAFTA, it leaves the status under SAPTA ambiguous. This ambiguity needs to be addressed.

Address the anomaly in tariff concessions between bilateral agreement and SAFTA: India can negotiate with Nepal to seek concessions on items in which the tariff duties are higher under the bilateral treaty than under SAFTA.

Remove the TRQ: India should consider removing the TRQ on four items, namely acrylic yarn, vegetable fats, zinc oxide and copper products as the quotas are underutilised.

Acceding to request by nepal for minimum 25 per cent value addition may be postponed: The WTO is in the process of reviewing the use, and application of preferential rules of origin for LDCs. In June 2018, the WCO had published a practical guide on the Nairobi Ministerial decision on rules of origin for LDCs (World Customs Organisation, 2018). India should examine these developments before acceding to Nepal’s request.

Change the CTC requirement from 4-digit to 6-digit under bilateral treaty: India should consider changing the requirement for change of tariff classification under the bilateral treaty from a 4-digit to 6-digit change of tariff heading. The change of tariff heading at the 6-digit level is a less stringent requirement and India is already offering it under the DFTP scheme.

Recommendations for addressing non-tariff barriers faced by Nepal:

Bridging the information gap: India could initiate information campaigns and workshops to reduce information asymmetry that presently exists in areas such as Pest Risk Analysis (PRA) on agricultural products.

Spread awareness about accredited laboratories: India could spread awareness among exporters, importers and regulators about all of the available public and private accredited laboratories in India, especially in states neighbouring Nepal. Governments can develop marketing and communication strategies to familiarise traders with the various NABL-accredited and FSSAI-notified laboratories.

Establish a non-tariff barrier resolution mechanism: India and Nepal should establish a non-tariff barrier resolution mechanism to enhance transparency.

Establish a bilateral institutional mechanism: India and Nepal should establish a bilateral institutional mechanism to coordinate and expedite FSSAI’s notification of the partner country laboratories accredited by the NABL. This process would help ensure that food products imported into India are tested only on a random basis and help catalyse food trade, particularly agricultural trade.

Implement trade facilitation measures: Introduce electronic data interchange, risk management systems and single windows at border points to enable the realisation of potential gains from coordination and efficiency.

Recommendations for addressing non-tariff barriers faced by India:

India should become a member of PIC and PIC/S: The Indian Department of Pharmaceuticals should apply for membership of the Pharmaceutical Inspection Convention (PIC) and the Pharmaceutical Inspection Cooperation Scheme (PIC Scheme), commonly referred to as PIC/S. The aim of PIC/S is the global harmonisation of health and regulatory inspection procedures through the establishment of common GMP standards and the provision of training opportunities for inspectors. The Nepalese authorities recognise pharmaceutical products without tests produced in countries that are PIC/S members. Thus, becoming a member of the PIC/S would allow India to export to Nepal without the need for the DDA, Nepal to conduct inspections and tests of Indian manufacturing facilities. This will make the process of exporting pharmaceutical products simpler, more efficient and less time-consuming.

Harmonise standards and regulations: India and Nepal should harmonise their standards and regulations to avoid ambiguity. The inconsistency in standards mandated by Nepal Bureau of Standards and Bureau of Indian Standards has had repercussions on India’s exports of cement to Nepal. The aligning of standards in future to international best practices will facilitate higher exports.

Recommendations for upgrading infrastructure:

Address infrastructure gaps at land customs stations: There are major infrastructure deficiencies at the Panitanki LCS with no provision for weighment bridge, cold storage or EDI facilities. Even though the Integrated Check Post has become operational at Raxaul, it is not clear whether it addresses all the infrastructure deficiencies which were there at the old LCS at Raxaul.

Need for gap assessment in infrastructure at the LCS along the India–Nepal border: To enhance the infrastructure at the 27 LCSs that India has with Nepal, it is imperative to conduct a thorough study of the existing infrastructure and conduct a gap analysis of both hard and soft infrastructure. The existing studies do not cover all elements of infrastructure and are also limited in their coverage as this limited information is available only for two LCSs, namely Raxaul–Birgunj and Panitanki–Kakarbhitta.

Recommendations for enhancing FDI from India to Nepal:

Bilateral investment treaty: India should sign a bilateral investment treaty as the current bilateral investment treaty stands terminated.

Capitalise on trade-investment nexus: There is a need to incentivise more trade-creating investment from India into Nepal. More FDI from India, especially in manufacturing sectors can help increase the export capacity and potential for Nepal to export to India and to rest of the world. This will also help Nepal in lowering its trade deficit with India.

Develop SEZs in Nepal: Nepal’s SEZ Act has opened the door for Indian investors to set up and develop Special Economic Zones (SEZs) in Nepal. Indian investors can choose to set up SEZs near the Indo–Nepal border in order to establish proximity with the Indian states. Further, SEZs can be established near existing ICDs with Nepal to enhance the movement of goods between the two countries (SEZ Development Committee, 2019). Developing SEZs in Nepal would help to attract Indian investors with ample incentives to make exports from there. Prospective Indian investors can also utilise the provision to acquire a 6-month non-tourist visa to conduct a research or a feasibility study for an SEZ. Indian investors can receive a residential visa if investments are more than US$10 million in the SEZ ((Investment Board of Nepal, 2018) Office of the Investment Board, 2018).

Establish dispute resolution mechanism: An innovative and well-defined dispute settlement mechanism must be put in place to build a strong business environment between the two countries.

Recommendation for a more comprehensive partnership:

The multi-dimensional cross-border flows between India and Nepal have resulted in several bilateral treaties of cooperation that need to be updated periodically. Given that enhancing trade in goods, hydropower and services as well as FDI are of equally high importance in future, it is recommended that the various treaties be subsumed into one single Comprehensive Partnership. This will go beyond the existing treaties on trade in goods to include services trade, power trade, FDI, trade facilitation, among others.

Footnotes

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

The authors received no financial support for the research, authorship and/or publication of this article.

Appendix

Table A1.

Top 50 Highest Potential Items at HS-6-Digit Level

HS Code	Product Description	Export Potential (in US$ million) in 2016	Included in Sensitive List	SAFTA Rates	MFN	Bilateral Rate of Duty for India (MFN rate minus rebate)	Bilateral Rate of Duty-SAFTA Rate of Duty
72071900	Containing by weight less than 0.25% of carbon	217.43	No	5	5	4.75	–0.25
85171200	Telephone sets, including telephones for cellular	192.21	No	Free	Free	–	–
27101910	Petroleum oils and oils obtained from bituminous mineral (kerosene)	131.44	Yes	Per kL ₹2,000	Per kL ₹2,000	–	–
27101920	Avaiation turbine fuel			Per kL ₹2,100	Per kL ₹2,100	–	–
27101930	High speed diesel			Per kL ₹2,000	Per kL ₹2,000	–	–
27101940	Light diesel oil			Per kL ₹440	Per kL ₹440	–	–
27101950	Fuel oil (furnace oil)			5	5	4.75	–0.25
27101960	Base oil (to be used in the manufacturing of lubricants)			30	30	28.50	–1.50
27101970	Jute batching oil and textile oil			15	15	14.25	–0.75
27101980	Lubricating oil			30	30	28.50	–1.50
27101991	Spindle oil			15	15	14.25	–0.75
27101992	Transformer oil			15	15	14.25	–0.75
27101993	Mineral turpentine oil			15	15	14.25	–0.75
27101994	Rubber processing oil			20	20	19.00	–1.00
27101995	White oil			15	15	14.25	–0.75
27101999	Other			30	30	28.50	–1.50
30039010	Other; homopethic medicaments (pure ayurvedic and Yunani)	101.80	No	9	10	9.50	0.50
30039040	Battisa, Drakshasab, Trifala…			9	10	9.50	0.50
30039090	Other			14	15	14.25	0.25
25231000	Cement clinkers	63.93	Yes	Per MT ₹2,400	Per MT ₹2,400	–	–
84295900	Mechanical shovels, excavators and shovel loaders …	60.36	No	5	5	4.75	–0.25
87032300	Other vehicles, with spark-ignition internal combustion…	50.27	Yes	80	80	77.60	–2.40
39012000	Polyethylene having a specific gravity of 0.94 or…	45.62	No	6	10	9.50	3.50
10063000	Semi-milled or wholly milled rice, whether or not…	42.63	No	9	10	9.50	0.50
88023000	Aeroplanes and other aircraft, of an unladen weigh…	41.51	No	6	10	9.50	3.50
12019000	Other	35.94	No	9	10	9.50	0.50
21069010	Other: dalmott, pappad, salted, bhujiya, chamena	34.23	Yes	15	15	14.25	–0.75
21069020	Pan masala without tobacco			30	30	28.50	–1.50
21069030	Zintang			10	10	9.50	–0.50
21069040	Concentrates of non-alcoholic soft-drinks			30	30	28.50	–1.50
21069050	Pachak, Rochak and similar goods			15	15	14.25	–0.75
21069060	Kurkure, Kurmure and Lays and similar goods			30	30	28.50	–1.50
21069070	Scented areca: Nuts without tobacco			Per kg ₹50	Per kg ₹51	–	–
21069090	Other			15	15	14.25	–0.75
27101210	Petroleum oils and oils obtained from bituminous mineral (motor spirit-petrol)	31.74	Yes	Per kL ₹15,200	Per kL ₹15,200	–	–
27101220	Hexsen (food grade)			Per kL ₹15,200	Per kL ₹15,200	–	–
27101290	Other			Per kL ₹15,200	Per kL ₹15,200	–	–
39021000	Polypropylene	29.12	No	6	10	9.50	3.50
72083700	Other, in coils, not further worked than hot-rolled	27.53	No	5	5	4.75	–0.25
10059000	Other	27.47	No	9	10	9.50	0.50
87112010	Motorcycles including mopeds and cycles fitted with an Auxiliary motor or without side cars … (of unassembled condition)	27.27	Yes	30	30	28.50	–1.50
87112090	Motorcycles including mopeds and cycles fitted with an auxiliary motor or without side cars … (other)			30	30	28.50	–1.50
87032200	Other vehicles, with spark-ignition internal combustion…	26.94	Yes	80	80	77.60	–2.40
23040000	Oil-cake and other solid residues, whether or not…	25.88	No	6	10	9.50	3.50
85072000	Other lead-acid accumulators	25.69	Yes	15	15	14.25	–0.75
87011090	Single axle tractors (other)	25.61	No	5	5	4.75	–0.25
27011900	Coal, whether or not pulverised, but not agglomera…	25.10	No	5	5	4.75	–0.25
72083900	Other, in coils, not further worked than hot-rolled	23.19	No	5	5	4.75	–0.25
85299010	Of television receiver	23.17	No	Free	Free	–	–
85299090	Other (including the parts of radio-broadcast receiver)			5	5	4.75	–0.25
90189000	Other instruments and appliances	22.94	No	5	5	4.75	–0.25
7134010	Lentils (unskinned, unsplit)	22.46	No	9	10	9.50	0.50
7134090	Lentils (other)			9	10	9.50	0.50
23099000	Other	19.55	No	5	5	4.75	–0.25
84713000	Portable automatic data processing machines, weigh…	18.64	No	Free	Free	–	–
31053000	Diammonium hydrogen orthophosphate (diammonium phos…)	18.46	No	Free	Free	–	–
87042300	Other, with compression-ignition internal combustion … (G.V.W exceeding 20 tonnes)	18.36	Yes	30	30	28.50	–1.50
85176900	Other apparatus for transmission or reception of v…	18.23	No	Free	Free	–	–
7031000	Onions and shallots	17.97	No	9	10	9.50	0.50
85176200	Other apparatus for transmission or reception of v…	17.90	No	Free	Free	–	–
79011100	Zinc, not alloyed: Containing by weight 99.99…	17.61	No	5	5	4.75	–0.25
7133100	Beans (Vigna spp., Phaseolus spp.): Beans of t…	16.59	Yes	10	10	9.50	–0.50
87042110	Double cab pickup principally designed for the transport of goods and having more than 2 seats including driver or the transportation of persons	16.49	Yes	30	30	28.50	–1.50
87042120	Single cab pickup principally designed for the transport of goods and having two seats including driver			30	30	28.50	–1.50
87042190	Other, with compression-ignition … (Other)			30	30	28.50	–1.50
62114200	Other garments, women’s or girls’: — Of cotton	16.35	Yes	20	20	19.00	–1.00
85414000	Photosensitive semiconductor devices, including ph…	16.16	No	Free	Free	–	–
74040000	Copper waste and scrap.	15.97	No	5	5	4.75	–0.25
39011000	Polyethylene having a specific gravity of less than…	15.96	No	6	10	9.50	3.50
88033000	Other parts of aeroplanes or helicopters	15.74	No	6	10	9.50	3.50
85238010	Discs, Tapes … (software)	15.72	No	Free	Free	–	–
85238090	Discs, Tapes … (other)			Free	Free	–	–
17011310	Raw sugar not containing added flavouring or colour… (Sakhar-Gud)	15.64	Yes	15	15	14.25	–0.75
17011320	Khanda sugar			15	15	14.25	–0.75
17011390	Other and other cane sugar			15	15	14.25	–0.75
26219000	Other	15.63	No	Per MT ₹1,000	Per MT ₹1,000	–	–
76072000	Aluminium Foil … (backed)	14.71	No	7	15	14.25	7.00
9041100	Pepper: Neither crushed nor ground	14.48	No	5	5	4.75	–0.25
72139110	Other: Of circular cross-section measuring les … (not more than 8 mm)	14.11	Yes	5	5	4.75	–0.25
72139190	Other			30 (For LDCs 7.25)	30	28.50	–
84742000	Crushing or grinding machines	13.52	No	5	5	4.75	–0.25
1042000	Goats	13.42	No	9	10	9.50	0.50
19053100	Sweet biscuits; waffles and wafers: Sweet biscuits…	12.99	Yes	30	30	28.50	–1.50
India’s maximum export potential for top 50 items at 6-digit		1,772
India’s maximum total export potential to Nepal		3,715
Share of the maximum export potential for top 50 items at 6-digit		48%

Source: UNCTAD–WITS database; Nepal Customs Tariff Manual.

Notes

References

Adhikari

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