India and Nepal have put diplomatic relations, that had frayed in the past year, back on track during a visit to New Delhi by Nepal's new prime minister, Pushpa Kamal Dahal, popularly known as Prachanda.
Prachanda's three-day trip to India less than a month after he assumed office is seen as an effort to re-balance ties after his predecessor had steered the tiny Himalayan country closer to its other giant neighbor, China.
Before landing in New Delhi, Prachanda said relations with India had become frosty for some time and he wanted to remove "the bitterness."
New Delhi, which has been concerned about Beijing's growing influence in the strategically located country, took the opportunity to woo Nepal back into its fold.
India's foreign ministry called it a "very warm visit" and said discussions focused on development projects in its landlocked neighbor that remains one of the world's poorest countries.
Three agreements signed on Friday include a $750 million credit line in aid for reconstruction work relating to the deadly earthquake that devastated Nepal last year. Two others relate to road projects. Discussions were also held on a long rail link from east to west Nepal and power projects.
Indian Foreign Secretary Subrahmanyam Jaishankar said that "a lot of it was really about getting the Nepali economy back on track, getting the reconstruction program moving."
The Nepalese leader also emphasized the need for development in his country. "I am convinced that without economic property, political transformation cannot be sustainable. This has become all the more important for my country."
After meeting his Nepalese counterpart, Indian Prime Minister Narendra Modi called the friendship "time-tested and unique."
"As immediate neighbors and close, friendly nations, peace, stability and economic prosperity of Nepal is our shared objective," he said.
Relations between the two countries soured after the picketing of the Indo-Nepal border for five months last year by ethnic Nepalese created crippling shortages in Nepal.
Kathmandu said the blockade was mounted with the tacit support of India, which supports the demands of the ethnic community for more representation in the country's new constitution.
As anger with India flared in Nepal, former prime minister Khadga Prasad Sharma Oli signed a series of trade deals with China.
But as New Delhi and Kathmandu restore the bonhomie in their ties after the recent rocky phase, the Nepalese leader spoke of the need to build trust.
"Trust and confidence are the prerequisites of this strong and sustainable, friendly relation and to ensure this we should respect each other's sensitivities and concern in spirit of good neighborliness," said Prachanda.
Political analysts say while rebuilding ties with India, Nepal will also continue to cultivate China, which has invested millions of dollars to help the country build roads, hospitals and other infrastructure. Beijing has made rapid inroads in Nepal in recent years as part of its broader strategy of gaining a foothold in South Asia.
However Nepali media say that Beijing has put off a planned visit by Chinese President Xi Jinping later this year due to lack of progress on Nepal's part on the projects agreed to between the two countries.