India’s flagship economic diplomacy programme, the grant of Lines of Credit (LOC), has had immense success in expanding the country’s development cooperation around the world. In the African region, for instance, countries have found LOCs to be appropriate alternatives to traditional development assistance. LOCs are a  popular tool among countries looking to fund their development goals. Closer to home, Nepal has received more than $1 billion in development assistance through Indian LOCs. This paper makes an assessment of the $67-million LOC granted to Nepal for the Rahughat hydropower plant project. The paper provides an overview of Indo-Nepalese relationship, the current electricity needs of Nepal and its overall energy potential, and the macro- and micro-economic impacts of the Rahughat project. It offers policy recommendations to improve the process of LOCs and their intended outcomes

• International Affairs
• Neighbourhood
• Indian Foreign Policy
• India
• Neighbourhood

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