"The Nepal-India trade treaty is guided by the principle of mutual benefit and reflects India's understanding of Nepal's need to increase exports through increased investments and expansion of production base," Koirala said in his address to the Confederation of Indian Industry (CII).

Describing his visit to India as a confidence-building measure, he said the trade treaty had given shape to a long-term mutually beneficial economic cooperation between the two countries.

"Nepal's exports to India have increased thereby addressing to some degree its enormous balance of payments deficit in the trade with India. The trade treaty has been beneficial to India as well and its exports to Nepal have increased very appreciably," he said.

Assuring Indian investors that Kathmandu would offer all support and facilities to Indian subsidiaries in Nepal, Koirala said "business leaders of the two countries could think in terms of taking advantage of the possibilities of import substitution based on the principle of comparative advantage and promotion of export-oriented industries for the Indian markets."

"There should be no misgivings on the trade front. It is largely because of the private sector initiative that we have a model trade treaty which has given a fillip to trade on both sides and promoted the Indian investments in Nepal," Koirala said.

Replying to a question that Indian automobile manufacturers were finding it difficult to export to Nepal due to tough emission norms, he said process was already on to provide special permission for Indian-made vehicles.

Earlier in his address, Federation of Nepal Chambers of Commerce and Industry president Pradeep K Shreshta said trade between the two countries could be boosted if the cooperation in the field of hydropower materialises and added that nepal was keen to have India's participation in this field.