Nepal, India agree trade deal

India and Nepal agreed to a new trade treaty on Saturday as Prime Minister Madhav Kumar Nepal ended a five-day official visit to the regional giant that both countries hailed a great success.

The Nepali Prime Minister on his first official visit to the country since his appointment in May, met his Indian counterpart Manmohan Singh.

He praised the "enormous goodwill" between the neighbours, calling his trip "most successful".

Both prime ministers "expressed their satisfaction at the state of bilateral relations between the two countries and resolved to work together to further strengthen and enhance cooperation", an Indian Foreign Ministry statement said.

Trade between the two countries stood at $ 1.9 billion in 2008-2009 and is expected to eventually reach three billion dollars, according to Indian Government figures.

India provides a vital lifeline to Nepal as its sole supplier of fuel and is responsible for over 44 percent of foreign direct investment in Nepal. Talks also focused on security and cross-border crime with counterfeit currency, drugs and weapons long a source of frustration for Indian officials.

The two mainly Hindu countries share an open frontier, allowing citizens of each nation to travel freely across each other's borders. Besides economic ties, they also have close cultural and religious links.

In a joint statement, Kathmandu renewed a promise that it would not allow its territory to be used for anti-India activities - a reference to extremists potentially using the country as a staging ground for attacks.

New Delhi also announced the construction of checkpoints along the porous border, as well as $ 64 million for a new police academy in its neighbour. (AFP)