Nepal's Deputy Prime Minister and Minister of Defence Ishwor Pokhrel (L) welcomes Indian Prime Minister Narendra Modi (R) on his arrival at Tribhuvan International Airport to attend the 4th Summit of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) in Kathmandu on August 30, 2018PRAKASH MATHEMA/AFP/Getty Images

In what can be seen as a major boost to regional connectivity, India and Nepal on Friday signed a memorandum of understanding (MoU) here on a preliminary engineering-cum-traffic survey of the proposed Raxaul-Kathmandu railway line as Indian Prime Minister Narendra Modi and his Nepal counterpart K.P. Sharma Oli agreed to foster bilateral ties.

The MoU is the first step forward in the ambitious rail connectivity initiative between the two countries announced in April this year.

Besides this, India is also considering five other cross-border railway lines with Nepal to ease connectivity and boost bilateral trade.

During the state visit of Oli to India in April, both sides had agreed to expand railway connection from Indian border town of Raxaul in Bihar to Kathmandu in a period of five years.

The MoU, coming a week after Nepal and China agreed to prepare a detailed project report of the Kerung(Tibet)-Kathmandu railway line, is a clear manifestation of geopolitical competition to woo the Himalayan nation by the two Asian giants.

The MoU was signed on the margins of the Fourth Bay of Bengal Initiative of Multi-Sectoral Technical and Economic Cooperation (Bimstec) Summit, which concluded earlier in the day in Kathmandu.

Modi and Oli witnessed the exchange of the MoU between the two governments.

On April 7 this year, the two governments had issued a joint statement on expanding rail linkages, agreeing to construct a new electrified rail line, with India's financial support, connecting Raxaul and Kathmandu.

According to an Indian Embassy statement, as a first step, it was agreed that the Indian government, in consultation with the Nepal government, would carry out preparatory survey work within one year, and the two sides would finalise the implementation and funding modalities of the project based on the detailed project report.

India's Konkan Railway has been asked to conduct a preliminary engineering-cum-traffic survey of the new rail line in consultation with the Nepalese government, the embassy stated.

Indian Ambassador to Nepal Manjeev Singh Puri and Secretary at Nepal Ministry of Physical Infrastructure and Transportation Madhusudan Adhikari signed the MoU on behalf of the respective governments.

"The Raxaul-Kathmandu rail line is expected to expand connectivity by enhancing people-to-people linkages between the two countries and promoting economic growth and development," the embassy statement said.

Before signing the MoU, two Prime Ministers held delegation-level talks where various bilateral issues figured.

In a tweet after the meeting, Modi said that the deliberations were wide-ranging, covering multiple aspects of India-Nepal relations.

"We discussed ways to further deepen our economic, trade and cultural ties. Enhancing connectivity between our nations was discussed as well," he said.

Later in the day, Modi and Oli jointly inaugurated the 400-bed Nepal-Bharat Maitri Pashupati Dharmashala in Kathmandu built with Indian aid.

Speaking on the occasion, Modi assured India's continued support for the development of the Himalayan kingdom.

"Every Indian is happy to see that there is political stability in Nepal. As a result, the country is developing fast. India's good wishes and support will always be with Nepal," said Modi after the inauguration ceremony.

He said the Indian economy was touching new heights.

"And I must tell you that our Nepali brothers and sisters have equal stakes in it. When we talk about development, it is part of our traditions to think about neighbours' prosperity as well."

The Indian Prime Minister said the newly inaugurated dharmashala would be a symbol of strengthening people-to-people power of both countries.

Pashupatinath, Muktinath, and Janakidham not only unite Nepal but they also give strength to the ties with India, he said.

"There is a distance of thousands of kilometres between Kanyakumari and Kathmandu but the ballads of Pashupatinath have been echoing there (Kanyakumari) for the past 1,500 years," he said.

Constructed within the framework of an MoU between the Indian government and the Pashupati Area Development Trust (PADT), the project has been constructed on 10,625 square metres of land owned by PADT, under Indian grant assistance of about Nepali Rs 220 million (around Indian Rs 14 crore).

The building has a total floor area of approximately 6,100 square metres, and consists of single, twin-bedded, four-bedded and ten-bedded rooms, a dining hall, kitchen, library, multi-purpose hall, water treatment plant, solar heater and generator house.

Construction of the project commenced in September 2016 and was handed over on Friday by the Indian government to PADT, which will be responsible for managing the facility for pilgrims visiting the Pashupatinath Temple area.

"The completion of Nepal-Bharat Maitri Pashupati Dharmashala is another milestone in strengthening cultural ties and people-to-people contacts between the two countries," the Indian government said.