"The railway network will be important for increasing trade and tourism for both countries," Baral added.
Landlocked and impoverished Nepal is wedged between India and China.
Analysts said such a rail link could reduce Nepal's reliance on India for many of its goods from drugs to transport vehicles and spare parts, cotton textiles and cement.
Many Nepalese are uneasy with what they say is New Delhi's dominance of the Himalayan nation's economy.
India is Nepal's largest trading partner, accounting for more than 60 percent of its trade. The two countries recently renewed a bilateral trade treaty which allows duty-free imports into India.
"Once the railway service comes into operation it will lessen dependence on India within a decade or so," Madhavi Singh Shah, economics professor at Kathmandu's Tribhuvan University, told AFP.
"Better connectivity will also be an opportunity for Nepal to take benefit of China's rapidly growing economy," she said.
