SANEI: Ongoing Studies

Improving Nepal-India Economic Relations: A Study of the Impact of India’s Foreign Direct Investment (FDI) and Transfer of Technology to Nepal

Macro economic indicators exhibit that Nepal’s economic status is vulnerable in terms of GDP per capita, commercial viability of natural resources, the extent of poverty and human development prospects. Half of the population lives in abject poverty. Internal resources are extremely limited to spur economic growth and alleviate poverty. Economic growth rate confined to marginally higher than 4 percent against the target of 6.5 percent during the Ninth Plan (1997-2002). His Majesty’s Government of Nepal (HMG/N) has accorded a top priority to attract Foreign Direct Investment (FDI) in recent years. Article 26 (12) of the Constitution of the Kingdom of Nepal 1990 states that "The State shall, for the purposes of national development, pursue a policy of taking measures necessary for the attraction of foreign capital and technology, while at the same time promoting indigenous investment. At this juncture India, a prominent development partner of Nepal, could be instrumental in strengthening burgeoning economy of Nepal by promoting its Foreign Direct Investment (FDI) and transfer technology to Nepal.

Objectives

The primary objectives of the study are to:

• Review the recent trends in investment policy of both India and Nepal
• Analyze the structure of Foreign Direct Investment (FDI) with reference to India’s joint ventures in Nepal
• Examine the impact of FDI from India on revenue, employment, trade and industrialization of Nepal
• Assess the nature and extent of transfer of technology from India to Nepal
• Explore new areas of joint ventures that would be beneficial to both Nepal and India

Expected Output

The study will help develop a model strategy for promoting India's investment in joint ventures in Nepal that will be instrumental for ensuring economic benefits to both Nepal and India. This will also provide 'win-win' opportunity for economic development in Nepal and India through expediting bilateral cooperation.

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