Under pressure from Nepal's new Maoist-led government, India says it is ready to review the 58-year-old treaty that governs the relationship between the two countries.  VOA correspondent Steve Herman reports from New Delhi the announcement followed talks between the former guerilla leader of Nepal's decade-long insurgency and Indian Prime Minister Manmohan Singh.  

India says it has agreed to its small neighbor's demand to review and consider modifying the 1950 treaty that governs relations with Nepal.

Earlier in the day, during a meeting with Indian politicians, Nepal's new prime minister called for all agreements between the two neighbors to be scrutinized.

Prime Minister Pushpa Kamal Dahal, better known as Prachanda, says it is time for "revolutionary change in bilateral ties."  He became the leader of Nepal's first republic government last month.  He was at the forefront of the decade-long insurgency against Nepal's army under the now ousted monarchy.

Indian Foreign Secretary Shivshankar Menon says the foreign and home secretaries of the two country's will meet to review Nepal's security concerns and other issues "to reflect today's realities."

Despite persistent questioning from reporters in New Delhi, Nepal's foreign minister, Upendra Yadav, a former Maoist cadre, would not specify which items in the 58-year-old treaty Kathmandu finds objectionable. 

"We have to upgrade it.  We have to revise it in order to make the friendship of both countries stronger," Yadav said.

Analysts say in addition to the security relationship and the desire for greater Indian investment that would help ease Nepal's trade imbalance, Kathmandu wants to change arrangements on sharing ofwater resources and management of the border.

Indian officials say the neighbors agreed they would set a minister-level joint committee to avert future flooding disasters.  This follows flooding on the Kosi River, which originates in Nepal, that put much of the Indian state of Bihar under water last month. 

During his visit which began Sunday, Prachanda has called the relationship between New Delhi and Kathmandu vital and requested increased investment in Nepal to help develop the landlocked Himalayan country. He says India has to understand there "is going to be a problem" if Nepal, wedged between China and India, does not develop.

Indian business leaders have expressed apprehension about Nepal's security situation, its lack of transparency and the confusing regulatory and tax structure.

The decade-long civil war in Nepal devastated the country's economy.

Prachanda, who is leading a 50-member government and business delegation to India, says his trip has put the two-way relationship on a new level, ending mutual suspicions.  He is to visit Bangalore on Wednesday to observe the city's famous information technology industry before returning home to Kathmandu.