New Delhi: India’s exports to Nepal recorded one of the steepest declines among its major trading partners in September, as youth-led protests and a political transition in the Himalayan nation disrupted cross-border trade. Shipments to Nepal fell 16.6% year-on-year (y-o-y) to $516.62 million, even as exports to other key markets such as Spain, China, and Brazil surged, reflecting India’s ongoing push to diversify its trade base.

The sharp fall underscores how political unrest in Kathmandu can quickly shake up one of New Delhi’s closest economic relationships. The turmoil stalled logistics and hit India’s export of key goods—from petroleum and steel to pharmaceuticals and food items—highlighting the fragility of India’s overland export routes. Other top exported goods hit included plastic raw materials, two- and three-wheelers, machinery, engineering goods and food items.

India’s exports to Nepal had last declined in June, by about 4% y-o-y to $593.81 million.

During April-September, India’s exports to Nepal were at $3.66 billion, up 1.9% from a year ago.

India is a key trading partner for Nepal, and it has a sizable trade surplus. In fiscal year 2025 (FY25), India exported goods worth $7.32 billion to the neighbouring country, while imports were at $1.2 billion. In FY24, exports were at $7 billion while imports totalled $831 million.

Indian goods reach Nepal almost entirely by road, as the landlocked Himalayan nation lacks seaports. The road routes were disrupted during the violence amid protests and the subsequent change in government in September.

Nepal had plunged into turmoil after massive youth-led protests against corruption, nepotism and joblessness. Prime Minister K.P. Sharma Oli and home minister Ramesh Lekhak were forced to resign, and former jurist Sushila Karki was named the new prime minister.

The unrest erupted after the government banned 26 social media platforms, including Facebook, X and YouTube, sparking accusations of censorship. Demonstrations turned violent in Kathmandu, leaving many dead and injured as security forces opened fire.

“In September, India’s exports to Nepal were affected by domestic instability within Nepal. The recent disruptions created uncertainty, prompting Indian manufacturers to pause shipments temporarily,” said Sankalp Gurjar, assistant professor (geopolitics and geoeconomics) at Gokhale Institute of Politics and Economics, adding that the fall in exports reflected a mix of geopolitical factors and Nepal’s internal instability rather than any fundamental shift in trade patterns.

“There is some concern that China might try to encroach on India’s trade position in Nepal. However, geography and market dynamics limit this risk,” Gurjar added. “While China can supply strategic or niche goods, Indian exports of general products are likely to remain dominant, supported by long-standing historical, political, and cultural ties.”

There was no response from a commerce ministry spokesperson to Mint‘s emailed queries till press time.

Elsewhere, India expands markets

In sharp contrast, India’s exports to several large and emerging economies posted strong double-digit growth during September, reflecting New Delhi’s strategy to expand its trade footprint beyond traditional partners.

Shipments to Spain jumped 150.8% to $987.7 million, the sharpest increase among India’s top 20 export destinations, driven by higher demand for petroleum products, textiles, iron and steel and telecom instruments.

Exports to Brazil climbed 25.8% to $749.9 million, while those to China surged 34.2% to nearly $1.5 billion, buoyed by stronger orders for ores, chemicals, and intermediate goods.

The sharp rebound in China-bound shipments came despite the broader global slowdown and ongoing trade frictions in major economies.

India’s exports to Germany, Italy, and the UK also rose in September, reflecting resilience in demand for the country’s engineering goods, pharmaceuticals and apparel despite continued global headwinds.

India’s exporters are navigating shifting global trade dynamics, including stringent tariff measures by the US on several categories of goods. The full impact of those levies began to play out in September, prompting Indian exporters to seek alternative markets and diversify their product base.

In August, US President Donald Trump announced an additional 25% tariff on Indian goods, citing New Delhi’s oil purchases from Russia, taking the total levies on Indian exports to 50% from 27 August. The US has been demanding a stop to energy purchases from Russia, alleging the trade gave Russia financial muscle in its war against Ukraine.

India’s merchandise exports held firm in September, rising 6.7% y-o-y to $36.38 billion, even as shipments to the US fell nearly 12%.

However, the country’s trade deficit widened to a 13-month high of $32.15 billion in September from $26.49 billion in August, as imports rose about 11% sequentially to $68.53 billion largely on account of soaring global prices of gold and silver.

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