Nepal’s expanding energy exports to India signal a pivotal shift in South Asian regional cooperation, particularly in the energy sector. The recent approval by India to import an additional 251 MW of hydropower from Nepal, bringing the total import to 941 MW, underscores the growing interdependence between the two neighbours. This partnership is not just about the exchange of electricity but also about fostering economic growth, enhancing energy security, and cementing geopolitical ties. For Nepal, the hydropower sector represents a critical economic lifeline.

Blessed with abundant water resources, the country has long been recognised for its hydroelectric potential. However, political instability, inadequate infrastructure, and limited market access have historically hampered its ability to fully harness this potential. The recent surge in energy exports to India marks a turning point in Nepal’s economic trajectory. By tapping into India’s vast energy market, Nepal stands to generate substantial revenue, which can be invested in the country’s infrastructure and social programmes. Last year alone, Nepal’s electricity exports generated NPR 16.9 billion, a significant boost to its economy.

This trend is likely to continue as more hydropower projects come online. For India, this partnership is equally strategic. As India grapples with the challenge of meeting its growing energy demands, particularly in states like Bihar, which will soon benefit from these imports, diversifying energy sources is critical. Nepal’s hydropower offers a reliable and sustainable option, helping India to reduce its reliance on fossil fuels and move closer to its renewable energy goals. Furthermore, this cooperation aligns with India’s broader strategy of regional integration, where the energy trade serves as a foundation for deeper economic and political ties.

However, the implications of this energy partnership extend beyond economics. Geopolitically, India’s engagement with Nepal in the energy sector can be seen as part of its broader strategy to counter-balance China’s growing influence in the region. China has been investing heavily in Nepal’s infrastructure and hydropower sectors, positioning itself as a key player in the country’s development. By strengthening its energy ties with Nepal, India is reinforcing its position as a reliable partner and ensuring that Nepal remains within its sphere of influence. This dynamic also highlights the importance of regional cooperation in addressing shared challenges. Both India and Nepal face the impacts of climate change, and hydropower offers a clean and sustainable solution to their energy needs. By working together, the two countries can build a more resilient energy infrastructure that benefits both populations.

The expansion of Nepal’s energy exports to India is a win-win situation for both nations. It provides Nepal with a steady revenue stream and an opportunity to develop its hydropower potential fully. For India, it offers a reliable source of renewable energy and strengthens its strategic position in the region. As this partnership continues to grow, it could serve as a model for regional cooperation in South Asia, fostering greater economic integration and stability in the region.