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Friday, 17 August, 2001, 17:57 GMT 18:57 UK
India, Nepal prepare for trade talks
Kathmandu street scene
India accounts for about 40% of Nepalese exports
When Indian foreign minister Jaswant Singh visits Nepal this weekend, the issue of trade between the two countries will be high on the agenda.

Goods from Nepal can be sold in India duty-free, following a treaty signed in 1996 between the two countries, aimed at boosting Nepalese exports.

However, five years on and Indian industry is complaining about the damaging effects of cheap competition from Nepal.

Now India wants to renegotiate the terms of the treaty, originally expected to be automatically renewed in December.

"The trade treaty will naturally figure during the talks," a Nepalese foreign ministry spokesman said.

Crucial India market

The Indian market is crucial for Nepalese exporters, accounting for about 40% of total trade with Nepal.

The treaty has encouraged investment and helped exports quadruple from 5.22 billion Nepali rupees ($69.58m) in 1996/97 to 22.61bn rupees in the last year.

While this may have been good news for Nepal, Indian industry claims the market was flooded with exports of hydrogenated vegetable oil, acrylic yarns, iron pipes, copper wire and zinc oxide, which India claims has hurt its market.

India also claims goods from other countries are being packaged in Nepal and exported to India.

"India wants some control of Nepalese exports," the BBC's Sushil Sharma told the World Business Report, but "they say their exports are too little to have any significant impact on the India economy."

Separately, Indian tea producers have voiced fears that their market is being eroded by cheaper imports from Nepal.

Some observers believe that India has more to fear from the relaxing of import duties with other members of the World Trade Organisation (WTO) than it does from Nepal.

BBC's Sushil Sharma
"India wants some control of Nepalese exports"
See also:

17 Aug 01 | South Asia
Indian minister visits Nepal
27 Jul 01 | Business
Darjeeling tea growers at risk
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