Trade, Transit and Logistics: India, China and the Border Economy
Nepal holds treaty access to eleven foreign ports, and almost all of its seaborne freight still arrives through India.
One usable transit route
Nepal has no coast and two land borders. On paper it holds treaty access to eleven foreign ports across two countries. Almost everything that arrives by sea arrives through India. The live commercial question is therefore which Indian corridor and which mode, not which country.
That gap between legal access and usable capacity is the organising fact of Nepali logistics. It explains most of what looks irrational in the country’s freight patterns.
The Indian regime
The India–Nepal Treaty of Transit was revised and signed on 1 June 2023 for a term of seven years, renewing automatically for a further seven unless terminated. The separate Treaty of Trade, and the Agreement of Cooperation to Control Unauthorised Trade that runs alongside it, were automatically renewed in October 2023. Rail movement operates under the Rail Services Agreement of 2004, amended by a letter of exchange in June 2021 that liberalised who may carry freight.
Under those instruments Nepal has transit access to Kolkata and Haldia, and to Visakhapatnam on the east coast. Rail transit runs on the Raxaul–Birgunj corridor to the inland container depot at Birgunj, and through Jogbani to the Nepali customs yard at Biratnagar. Integrated check posts operate at Birgunj, Biratnagar and Nepalgunj, with Bhairahawa under construction.
The Trade Treaty gives Nepal unilateral duty-free access to the Indian market. The concession runs one way. It is why Nepal’s export mix is dominated by products with a viable Indian buyer rather than by products with global comparative advantage.
Bilateral trade, on Indian fiscal years and in US dollars, runs as follows.
| Indian FY | India to Nepal | Nepal to India | Total |
|---|---|---|---|
| 2021-22 | 9,645.74m | 1,371.04m | 11,016.79m |
| 2022-23 | 8,079.25m | 841.52m | 8,920.77m |
| 2023-24 | 7,040.98m | 831.11m | 7,872.09m |
| 2024-25 | 7,385.98m | 1,288.83m | 8,674.82m |
| 2025-26 | 7,447.12m | 1,941.87m | 9,388.98m |
The second column is the one to read. Nepali exports to India fell by nearly 40% between 2021-22 and 2023-24, then more than doubled by 2025-26. A swing of that size in three years says little about competitiveness. It reflects the concentration of Nepal’s export basket in a handful of processed and re-exported product lines whose viability turns on Indian duty treatment and rules-of-origin enforcement. Anyone modelling Nepali export revenue should model the policy variable, not the demand variable.
The Kolkata to Biratnagar rail link
The first direct rail cargo service from Kolkata to Biratnagar ran on 18 July 2026. It is the only direct rail freight link into Nepal other than Birgunj. Trains run through the Jogbani customs yard to the Biratnagar integrated check post, carry up to 45 forty-foot containers, and are expected to complete the run in around 24 hours. The inaugural service carried 40 containers of crude canola grain for Swastik Oil Industries, operated by Container Corporation of India.
Two administrative steps made it possible, and they are more instructive than the ceremony. India’s Central Board of Indirect Taxes and Customs amended the Electronic Cargo Tracking System regulations on 4 November 2025. The two governments then exchanged a letter settling the procedural framework on 26 February 2026. Nepali transit improvements usually arrive this way, by amendment to Indian customs procedure rather than by treaty change. Treaty text alone is a poor guide to what is currently possible.
Trade experts quoted at the launch projected logistics cost reductions of 15 to 20 percent against road haulage from Visakhapatnam, the saving coming largely from removing the truck reload at Birgunj. For an importer in eastern Nepal, it is the first material change to the eastern corridor’s cost structure in years.
The Chinese regime
Nepal and China signed a Transit and Transportation Agreement in March 2016 and its implementing Protocol on 30 April 2019. The Protocol opens four Chinese seaports — Tianjin, Shenzhen, Lianyungang and Zhanjiang — and three land ports at Lanzhou, Lhasa and Shigatse, with six dedicated transit points and provision for inland, road and rail services.
Seven years on, the practical position is that only Rasuwagadhi and Tatopani carry trade with China, and both are mountain crossings subject to weather, landslide closure and periodic administrative suspension. Officials said at the time of signature that poor infrastructure on the Nepali side meant traders would not be able to use the Chinese ports immediately, and that assessment has proved durable.
The distances explain the rest. Tianjin sits several thousand kilometres from the Nepali border, across the Tibetan plateau. Kolkata is roughly a day’s drive from Birgunj. The Chinese route is a strategic option that reduces Nepal’s exposure to a single transit partner. On current infrastructure it is no commercial alternative for general cargo, and a business case that assumes otherwise should be tested against a specific quoted lane rather than against the Protocol.
The trade balance
In the ten months to mid-May 2026 Nepal exported NPR 248.96 billion and imported NPR 1,692.64 billion. Exports grew 14.2% and imports 14.8%, so the absolute gap widened even as both sides grew at similar rates. Close to seven rupees of goods enter for every rupee that leaves.
Three consequences follow for anyone moving physical goods.
Backhaul is structurally scarce and structurally cheap. A container that arrives loaded leaves empty. Outbound freight rates from Nepal are therefore better than the country’s export volumes would suggest, and inbound rates worse.
Customs revenue is fiscally load-bearing. So much of the tax base is collected at the border that customs administration is never a purely technical function, and valuation disputes carry a revenue-protection logic a trader should expect.
And the FY 2083/84 budget moved in the trader’s direction. Nepali reporting of the budget describes customs duty bands cut from eleven to seven, excise removed from 360 categories of goods, and duty reduced on 273 categories of industrial raw materials. Those are reported measures; the Finance Act text should be checked before a landed-cost model is rebuilt on them.
Which customs act applies
The governing statute is unresolved. The Department of Customs publishes the Customs Act 2064 (2007) as its operative act. The Nepal Law Commission catalogues a Customs Act 2082 dated 28 Asoj 2082 (14 October 2025). This page does not state which is in force, because the commencement provision of the later act was not obtained. For most trading operations the exposure is limited: duty rates come from the annual Finance Act rather than from the customs statute. For anything involving valuation appeals, bonded warehousing or penalty exposure, the question needs answering before a position is taken.
LDC graduation
Nepal was scheduled to graduate from least-developed-country status in November 2026, and moved in May 2026 to seek a three-year deferral through the UN Economic and Social Council and its Committee for Development Policy. Graduation removes duty-free quota-free access to the European Union and other developed markets, tightens rules of origin, and ends the pharmaceutical patent flexibilities that LDCs enjoy.
For an exporter, this is the largest single unpriced variable in a Nepali trade plan. India’s unilateral concession is bilateral and unaffected. Everything sold beyond India rests on a preference regime whose expiry date is currently a request rather than a decision, and that will be settled in New York rather than Kathmandu.
Sources
-
Commerce Wing brief — India–Nepal economic and trade relations
Embassy of India, Kathmandu · Accessed 2026 · Tier 2 — Official publication
Supports: The Treaty of Transit revised 1 June 2023 for seven years with automatic renewal; the Treaty of Trade and the Agreement on Control of Unauthorised Trade automatically renewed in October 2023; the Rail Services Agreement of 2004 amended by letter of exchange in June 2021; transit ports at Kolkata/Haldia and Visakhapatnam; rail routes Raxaul–Birgunj and Jogbani; integrated check posts at Birgunj, Nepalgunj and Biratnagar operational with Bhairahawa under construction; unilateral duty-free access for Nepal to the Indian market; and bilateral trade values by Indian fiscal year from 2021-22 to 2025-26.
Accessed 26 August 2026
-
Historic Kolkata–Biratnagar rail cargo service begins. Transit costs set to fall
The Kathmandu Post · 18 July 2026 · Tier 6 — Professional or news source
Supports: That the first direct Kolkata to Biratnagar rail cargo service ran on 18 July 2026 via the Jogbani customs yard to Biratnagar ICP, with capacity of up to 45 forty-foot containers and expected transit of around 24 hours; that it followed a Central Board of Indirect Taxes and Customs amendment to the Electronic Cargo Tracking System regulations on 4 November 2025 and a letter of exchange on 26 February 2026; that the inaugural train carried 40 containers operated by Container Corporation of India; and that trade experts projected a 15 to 20 percent reduction in logistics cost against road haulage from Visakhapatnam.
Accessed 26 August 2026
-
Nepal signs deal with China to access seven Chinese sea and land ports
The Kathmandu Post · 30 April 2019 · Tier 6 — Professional or news source
Supports: That the Protocol to the Transit and Transportation Agreement was signed on 30 April 2019 under a parent agreement of March 2016; that it opens the seaports of Tianjin, Shenzhen, Lianyungang and Zhanjiang and the land ports of Lanzhou, Lhasa and Shigatse; that six dedicated transit points are provided for; and that only Rasuwagadhi and Tatopani were in use for trade.
Accessed 26 August 2026
-
Nepal Rastra Bank, Research Department · Data to mid-May 2026 · Tier 2 — Official publication
Supports: Exports of NPR 248.96 billion, up 14.2%, and imports of NPR 1,692.64 billion, up 14.8%, in the ten months to mid-May 2026.
Accessed 26 August 2026
-
Annual Foreign Trade Statistics
Department of Customs · Series covering FY 2064/65 to FY 2083/84 · Tier 2 — Official publication
Supports: That the Department of Customs publishes an annual foreign trade statistics series, with volumes through FY 2083/84.
Accessed 26 August 2026
-
Department of Customs · 2064 BS (2007) — published by the Department as its operative statute · Tier 1 — Primary legal instrument
Supports: That the Department of Customs publishes the Customs Act 2064 as the governing customs statute.
Accessed 26 August 2026
-
भन्सार ऐन, २०८२ (Customs Act, 2082)
Government of Nepal / Nepal Law Commission · Dated 28 Asoj 2082 (14 October 2025); commencement status unconfirmed · Tier 1 — Primary legal instrument
Supports: The existence of a Customs Act 2082 in the Law Commission catalogue.
Accessed 26 August 2026
-
Nepal will seek delayed LDC graduation citing economic constraints
The Kathmandu Post · 16 May 2026 · Tier 6 — Professional or news source
Supports: That graduation was scheduled for November 2026, that Nepal moved to request a three-year deferral, that ECOSOC and the Committee for Development Policy decide, and that duty-free access to the EU, rules of origin and pharmaceutical patent flexibilities are at stake.
Accessed 26 August 2026
-
Everything You Need to Know About Nepal's Budget for FY 2026/27
Nepalnews · 2026 · Tier 6 — Professional or news source
Supports: Reported customs measures in the FY 2083/84 budget: duty bands reduced from eleven to seven, excise abolished on 360 categories of goods and duty reduced on 273 categories of industrial raw materials.
Accessed 26 August 2026
Related guides and next steps