Indias attitude towards Nepal is also determined by its economic interest such as the utilization of water resources, promotion of trade and private capital investment and joint venture. The utilization of water resources is of great importance in promoting Indias economic interest in Nepal. A large part of Indian eastern rivers system originates in Nepal. These rivers can be utilised for the purpose of powers generation, irrigation and navigation. Various efforts were made by the two countries towards utilization of these resources it has not been possible due to misperception, lack of confidence and discontent towards each other. A serious problems faced by the two countries has been that of flood caused by rivers which devastates a large areas in the Terai region of Nepal and the adjoining states of Uttar Pradesh and Bihar in Indian. The problem can be solved by the construction of dams. Indias endeavours of utilizing of these rivers depends only the active cooperation of Nepal. Promotion of trade with Nepal is important for India to advance its economic interest in south Asia. So, their interests are closely interwoven. It has natural bearing upon the bilateral relations.