INDIA-NEPAL ECONOMIC RELATIONS IN NEW MILLENNIUM: PROBLEMS AND PROSPECTS

The conventional economic wisdom holds that trade and international economic relations are beneficial for the growth of a country. Although one country may have a higher productivity in production of all goods compared to another country, the relative productivities in producing different goods will differ. Trade is based on the relative comparative advantage and increases welfare in both countries. In this context India and Nepal economic relations have unique relation. There are historical, cultural, linguistic, ethnic, social and family links between people living in India and Nepal. After Nepalese political system moved in republic to monarchy India and Nepal have more or less similar political system. Therefore, the trade and other related relations between Nepal and India have its own significance. Trade and economic relations between these two countries often goes beyond the economic reason significantly influenced by the social-ethical norms and values. Research and studies reveal that both the countries have comparative cost advantage in trading amongst themselves for several reasons, which we will discuss in this article. Adapted from the source document.