Nepal, a landlocked country, relies on transit access from neighbouring countries to participate in international trade …. For Nepal, the nearest sea-port is that of Kolkata in India and the transit arrangements between the two countries are … governed by two main legal instruments: India-Nepal Treaty of Trade and Transit and the India-Nepal Rail Services Agreement …

trade policies. We examine here the consequences of such a “Gulliver” effect, looking at the case of Nepal whose economy is … closely linked to the economy of India. Since India’s protective policies are not optimal for Nepal, we consider the various … alternatives for Nepal. The “optimal divergence” is for Nepal to allow the free import of intermediate and capital goods, while …