After a prolonged period marked by significant political upheaval, Nepal has embarked on a transformative journey, culminating in what many are calling a Gen-Z revolution in September 2025. This particular episode led to the establishment of a new government, reflecting the desires and aspirations of a younger generation eager for change. Amidst this backdrop, the Nepali populace has overwhelmingly cast their votes in favor of a newly formed political party, the Rastriya Swatantra Party (RSP), under the leadership of Balendra Shah, or Balen. At 35 years old, he is the youngest leader in Nepal's history and the first Prime Minister from the Madhesi community. Shah was sworn in as Prime Minister of Nepal just last month, leaving the international community, particularly in neighboring India, both surprised and intrigued by these developments.

The relationship between India and Nepal has historically been characterized by close political, economic, and cultural ties, bolstered by open borders that facilitate movement and connection between the two countries. This unique aspect of their relationship stands in contrast to India's interactions with other neighbouring nations, where border regulations are more stringent. However, since 2014, the bilateral relations between New Delhi and Kathmandu have experienced numerous challenges. Various incidents and policy decisions have led to a deterioration of these once-strong ties, marking a period of unprecedented strain in what was traditionally considered a robust partnership.

After the BJP came to power in May 2014, Prime Minister Narendra Modi chose Nepal to be his first official foreign destination. The visit turned out to be a historical one wherein India committed to resolving the pending border issue with Nepal as well as revisiting the 1950 Friendship Treaty with Nepal, a long pending demand of Kathmandu. India even committed to establish a foreign secretary-level talks to resolve the border issue.

Modi’s maiden visit to Nepal as the Prime Minister took place on August 3-4, 2014 even as both sides laid down an elaborate path of cooperation. It was his first visit to the country after taking office and the first by an Indian Prime Minister in 17 years. The visit was a key part of the new government's ‘Neighbourhood First Policy’, following his invitation to SAARC leaders for his swearing-in ceremony in May 2014. The visit from all aspects turned out to be a landmark trip.

Modi became the first foreign leader to address Nepal’s Constituent Assembly and Legislature Parliament. He announced a $1 billion soft line of credit for infrastructure and energy projects. India and Nepal also signed agreements to expedite the Pancheshwar Multipurpose Project and established a 45-day deadline for a Power Trade Agreement.

While the 2014 visit initially rekindled hope for a breakthrough, the process of revisiting the 1950 Treaty of Peace and Friendship remained stalled. Although both sides agreed to "review, adjust, and update" the treaty during Modi’s visit, the matter has since been caught in a cycle of consensus-building and diplomatic delays.

The downfall in bilateral ties got accelerated with the coming in of the KP Sharma Oli government in Nepal in October 2015, who took an aggressive stance against India. He was the first Prime Minister elected under Nepal's newly adopted 2015 constitution, securing 338 votes in a parliamentary election against his rival, Sushil Koirala. This first tenure lasted until August 4, 2016, when he resigned after losing the support of his coalition partners.

But matters between both countries hit nadir with the onset of the 2015-2016 Nepal border blockade, which turned out to be a major humanitarian and diplomatic crisis that lasted for nearly five months, from September 2015 to February 2016. It was triggered by the promulgation of Nepal's new constitution, which Madhesi and Tharu ethnic groups in the southern Terai region claimed marginalized them. Madhesi groups, who share close cultural and linguistic ties with India, argued that the new 2015 Constitution reduced their political representation and inclusive federalism.

The crisis strained India-Nepal relations and pushed Nepal to sign a landmark fuel and transit agreement with China to reduce its total dependency on India.

Meanwhile, in 2020, again under Oli’s second term as the PM, Nepal revised its national map to include approximately 335 square kilometres of territory-Kalapani, Lipulekh, and Limpiyadhura-which is also claimed and currently administered by India. The decision was triggered by a series of events that Nepal viewed as an encroachment on its sovereignty. In November 2019, India released a new map following the reorganisation of Jammu and Kashmir. Nepal protested that this map incorrectly depicted the disputed Kalapani region as Indian territory.

The immediate trigger, however, was India's inauguration of an 80-km road connecting Dharchula (Uttarakhand) to the Lipulekh Pass, a strategic route for the Kailash Mansarovar pilgrimage. Nepal claimed this road passed through its territory.

While Nepal continues to use the new map, which has been rejected by New Delhi, the matter continues to create tensions in the bilateral ties even as it has the potential to once again trigger a major diplomatic row under the newly formed Balen Shah dispensation.

This is because last month, India said it is planning to resume border trade with China, after a hiatus of six years, through the Lipulekh Pass. The trade through this route used to take place annually between June and September. Trade through this route got stalled due to Covid, followed by tensions between India and China over the military standoff at the Line of Actual Control (LAC) in Ladakh.

The map change by Nepal led to a significant "cartographic war" and strained long-standing diplomatic relations. Nepal protested this as a violation of its sovereignty, citing the 1816 Treaty of Sugauli, which identifies the Kali River as the western boundary of Nepal.

To formalize the map, the Oli government passed the Second Amendment to the Constitution in June 2020. This amendment updated the national emblem to include the revised map and received unanimous support from all political parties in Nepal's Parliament.

With India planning to resume trade again through the Lipulekh Pass, the same old challenges can come back to strain the ties again even as the new Balen Shah dispensation has said his government is “eager to work closely” with New Delhi.

In August 2025, the RSP had strongly objected to India and China resuming trade through the Lipulekh Pass, calling it a violation of Nepal's territorial sovereignty. The party, which is now ruling in Nepal, demanded that the government address the dispute regarding Lipulekh, Kalapani, and Limpiyadhura firmly with both neighbours-India and China.

The matter was vehemently taken up by RSP’s Shishir Khanal who was then the party’s head of international department. In a statement to the then Oli government he had said that Lipulekh, Kalapani, and Limpiyadhura are "inseparable parts" of Nepal and that “No activity or agreement by any country on Nepali land is valid without Nepal’s consent.”

Khanal’s 2025 stance is significant as he now holds the position of Foreign Minister of Nepal, which places him in the direct role of managing these very diplomatic challenges. Therefore, it has become imperative for India now to consider this matter seriously and initiate a dialogue with Kathmandu thereby resolving the matter amicably before resumption of the trade with China.

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