Nepal is asking Indian industry to make greater investments in the tiny mountain country. The landlocked nation relies on India for most of its trade.

On a recent visit to India, Nepal's Prime Minister Sher Bahadur Deuba urged Indian investors to set up joint ventures in areas ranging from agro-processing to tourism to manufacturing. Mr. Deuba identified hydroelectric power as a potential area of collaboration between the two countries. "Water holds an important key to our mutual prosperity. Hydropower generation is perhaps the most important area where we need a sustained flow of investment," he said. Hydropower is the main source of electricity in Nepal, but the country is exploiting less than one percent of its massive potential. Both India and Nepal face a huge shortfall in power generation, and could benefit immensely from exploiting Nepal's water resources.

Indian businesses account for a third of all joint ventures in Nepal. India is also Nepal's largest trading partner - encouraged by special duty free arrangements. Indian ports are also the transit points for all Nepalese trade.

Now, Nepal is hoping to emerge as a trading hub between India and China. Binod Chaudhary, President of the Confederation of Nepalese Industry, says Nepal's strategic location between its two giant neighbors could be an asset as the two countries step up trade. "There are huge opportunities in being a service provider to facilitate the trade between China and India which is now beginning to take place through Tibet, through Nepal," he said.

Nepal must overcome, however, concerns of Indian businessmen after Nepal's Maoist rebels have threatened industries. Just Saturday the rebels - waging a deadly rebellion in the country - ordered the shutdown of 35 industries including some Indian joint ventures.