India's Neighbourhood Policy and Why It Keeps Losing Ground It Should Hold

The pattern has repeated often enough across India's immediate neighbourhood that it can no longer be dismissed as a series of unrelated local political shifts. In the Maldives, the 2023 election of President Mohamed Muizzu on a campaign that included an explicit "India Out" plank led to the withdrawal of Indian military personnel operating surveillance aircraft and a period of visibly cooler relations before a partial thaw the following year. In Bangladesh, the fall of the Sheikh Hasina government in August 2024, following weeks of student-led protests, removed from power the single most reliably India-aligned leader in the country's recent history and replaced her with an interim administration whose orientation toward India has been markedly more cautious, accompanied by a rise in anti-India rhetoric in Bangladeshi domestic politics that has surprised many Indian observers with its intensity. Sri Lanka's 2022 economic collapse briefly drew the country closer to India through emergency credit lines, but the underlying competition with Chinese-financed infrastructure and port projects, including at Hambantota and Colombo, has continued regardless of which government sits in Colombo. Nepal has cycled through similar oscillations for over a decade, with map disputes over Kalapani and Lipulekh territory flaring periodically even amid deep economic and social integration between the two countries.

Not a Single Story, But a Recognisable Pattern

It would be analytically lazy to treat these as a single undifferentiated narrative of Indian decline, since the specific drivers in each country differ substantially: Maldivian politics has long featured a genuine domestic constituency wary of Indian influence dating back decades before China became a factor; Bangladesh's upheaval was driven overwhelmingly by domestic grievances around quotas and authoritarian governance rather than foreign policy; Nepal's disputes are rooted in colonial-era boundary ambiguities that predate any Chinese involvement. But a common structural thread runs beneath these individual stories: in each case, India's relationship had become closely identified with a specific ruling party or leader, leaving India's standing exposed to that leader's domestic political fortunes in a way that a more broadly cultivated relationship with a country's full political spectrum would have cushioned.

The China Factor and Its Limits

China's role in this picture is real but is often overstated in Indian commentary in ways that let India's own diplomatic choices escape scrutiny. Chinese infrastructure financing, through the Belt and Road Initiative and bilateral loans, has given smaller South Asian states genuine alternatives to Indian or Western financing, alternatives that come with fewer of the governance conditions that Indian and multilateral lending typically attaches, making them attractive to governments seeking speed over scrutiny. But Sri Lanka's debt crisis, driven substantially by unsustainable Chinese-financed projects including the Hambantota port that was eventually leased to a Chinese state company for ninety-nine years after Colombo could not service the debt, has also demonstrated to the region that Chinese financing carries its own serious risks, a lesson that has made several South Asian governments, including Bangladesh's more recent administrations, somewhat more cautious about over-reliance on Chinese capital than they were a decade ago. India's own development financing, through lines of credit and grant assistance, has grown substantially and includes genuinely valued projects, from the Neil Island connectivity works to power grid interconnections with Bangladesh and Nepal, that China's more visible infrastructure diplomacy sometimes overshadows in public perception without actually exceeding in substance.

Where India's Own Instruments Fall Short

The more uncomfortable truth is that India's own diplomatic and bureaucratic instruments for engaging the neighbourhood remain slower and more risk-averse than the situation demands. Indian development assistance projects have periodically suffered from implementation delays attributable to procedural friction between Indian executing agencies, host government bureaucracies and financing conditions, a pattern documented in projects across Nepal and Bangladesh where announced Indian-funded works have taken considerably longer to complete than comparable Chinese-financed projects, feeding a regional perception, not always fair but not baseless either, that India talks about partnership more fluently than it delivers on tight timelines. India's diplomatic engagement with opposition parties and civil society in neighbouring countries has also historically been thinner than with incumbent governments, a legacy of a diplomatic culture that prioritises state-to-state relationships and has been slower to hedge against political transitions than China's own increasingly pragmatic willingness to engage across a neighbouring country's political spectrum.

The Domestic Political Complication

There is also a domestic dimension to this problem that Indian commentary is often reluctant to name directly: perceptions in neighbouring countries, particularly Bangladesh and to a lesser extent Nepal, that India's domestic politics around citizenship, religious minorities and border management have hardened in ways that complicate the goodwill India seeks to build regionally. Whatever view one takes of these domestic policies on their own terms, their spillover effects on neighbourhood diplomacy are a real cost that Indian foreign policy planners have to reckon with rather than treat as an unrelated domestic matter with no external dimension, since neighbouring publics and political classes do form views of India partly through this lens regardless of how Indian policymakers intend those measures to be read.

What Sustaining Influence Would Actually Require

None of this means India lacks durable advantages in its own neighbourhood: geographic proximity, historical and cultural ties, labour migration links, and the simple fact that India remains by far the largest market and most significant economic partner for every South Asian state except Pakistan are structural strengths that no amount of Chinese financing fully offsets. But sustaining that advantage into genuine influence requires India to compete more directly on the dimensions where China has gained ground, chiefly the speed and predictability of project delivery, and to diversify its political relationships within neighbouring countries so that a change of government does not each time feel to New Delhi like starting over. The neighbourhood has not been lost, but the margin for complacency that India once could afford, resting on history and geography alone, has narrowed considerably, and Indian diplomacy will need to work harder in the coming decade for outcomes that once arrived comparatively easily.