Overview In a series of early diplomatic exchanges, Narendra Modi and Nepal’s newly‑sworn‑in prime minister Balendra Shah expressed a desire to “work closely” to advance bilateral ties. Their dialogue comes at a time when Nepal, a land‑locked nation, relies heavily on India for trade, transit and energy connectivity. Key Developments Both leaders signalled readiness to start a “new chapter” based on shared culture, open borders and intertwined politics. Shah, at 35 , is the first Madhesi prime minister, breaking the historic dominance of the Brahmin‑Chettri Pahadi elite . India’s plans for a regional energy grid could boost Nepal’s hydropower exports and revenue. Potential revision of the 1950 Bilateral Friendship Treaty to reflect new geopolitical realities. India may consider easing over‑flight restrictions for Nepal’s new airports and reducing barriers on power purchases sourced with third‑country assistance. Important Facts • Nepal’s economy is heavily dependent on remittances and tourism; about 14 % (≈3.5 million) of its population works abroad. • The ongoing war in West Asia has disrupted fuel and fertilizer supplies, creating an immediate need for Indian assistance. • Previous Nepalese governments sought over‑flight rights for new airports and a review of the friendship treaty, but progress stalled after the 2024 blockade and diplomatic friction. UPSC Relevance The episode illustrates several themes frequently tested in the UPSC syllabus: India‑Neighbourhood Policy (GS2) : Managing relations with a strategically important neighbour while balancing domestic political changes. Energy Security (GS3) : Leveraging trans‑border hydropower projects and regional grids. Economic Interdependence (GS3) : The role of remittances and trade in Nepal’s fiscal health. Political Transition (GS2) : Impact of a new Madhesi leadership on Nepal’s foreign policy orientation towards India, China and the United States. Treaty Revision (GS2) : Need to update legacy agreements like the 1950 friendship treaty to reflect contemporary geopolitical dynamics. Way Forward For a constructive India‑Nepal partnership, the following steps are advisable: Invite Balendra Shah to Delhi at the earliest to cement “Neighbours First” rhetoric. Launch a joint task‑force to fast‑track the energy‑grid project and facilitate hydropower exports to India. Re‑negotiate the Bilateral Friendship Treaty to include provisions on over‑flight rights, power trade and disaster‑relief cooperation. Coordinate humanitarian assistance to mitigate the impact of the West Asia war on Nepal’s fuel and fertilizer imports. Engage with Nepal’s Madhesi leadership to understand their domestic priorities, ensuring India’s policies are responsive rather than prescriptive. By aligning diplomatic outreach with Nepal’s evolving internal dynamics, India can safeguard its strategic interests while fostering stable, mutually beneficial neighbourhood relations.