``A new chapter in the relationship between the two countries has opened,'' Prime Minister Atal Behari Vajpayee told reporters after talks with 53-year-old visiting Nepalese King Birendra.

He said the Nepal king's visit came on a very auspicious moment when India is going to celebrate the 50th anniversary of her republic.

King Birendra, who arrived with Queen Aishwarya on a State visit on Sunday, said Nepal was also equally keen to strengthen relations with India in diversified areas.

The Nepalese leader, who is the chief guest at tomorrow's Republic Day celebrations, met President K R Narayanan, Vice President Krishan Kant and other Indian leaders

The Indian side stressed that New Delhi was keen on having a ``forward-looking relationship'' with Nepal and make concerted efforts to implementvital agreements signed by the two neighbours on trade, transit, investment, the Mahakali treaty on sharing water, power, trade and civil aviation.

Earlier, King Birendra and Queen Aishwarya were given a ceremonial welcome on the forecourt of Rashtrapati Bhavan here by President K R Narayanan, First Lady Usha Narayanan, Prime Minister and his Cabinet colleagues.

Asked about the Mahakali project between the two countries, King Birendra said talks were going on at various levels and were encouraging. ``Let the officials do the talking,'' he said.

In a departure from tradition, President Narayanan and Usha Narayanan had met the King and Queen last night in the guest wing of the Rashtrapati Bhavan soon after their arrival.

Indian exports to Nepal in 1997-98 were 27.24 billion Nepalese rupees, while imports from Nepal touched 9.07 billion Nepalese rupees.

As a result of the trade treaty which paves the way for duty-free access without quantitative restrictions to the Indian market for all articlesmanufactured in Nepal, expect a small negative list, two-way trade is increasing at the rate of over 20 per cent annually, officials said.

New Delhi's interest in further consolidating cooperation in the Power Sector to meet the burgeoning demand in the country, besides enhancing cooperation in tourism, was also conveyed to the Nepalese side.

Both sides discussed measures to effectively manage the open border between the two countries and decided to hold further consultations on the issue.