India and Nepal today reached a new trade treaty and an agreement to control unauthorised trade, particularly from a third country, aimed at widening the bilateral economic engagement.
   
The trade treaty, which has been negotiated for the last two years, aims at enlarging the scope of the existing institutional framework, under which India gives duty-free access to its market to goods manufactured in Nepal.

However, the trade treaty and the agreement to control unauthorised trade would be formally signed later, an official said.

The agreements were initialled by commerce secretary Rahul Khullar and Nepalese secretary of Commerce and Supplies Purushottam Ojha here.

External affairs minister SM Krishna and Nepalese minister of Commerce and Supplies Rajendra Mahto were also present on the occasion.

The new pacts will replace the existing arrangements since 1991, extended from time to time.
    
The agreements were initialled on the last day of the five-day visit of Nepalese Prime Minister Madhav Kumar Nepal.
    
The bilateral trade takes place generally in Indian currency barring for a few items. Indian rupee is legal tender in Nepal and is freely convertible.

The trade between the two countries was USD 1.8 billion in 2008-09 (April-February).