In spite of developing robust development partnership with neighbouring countries and discharging her responsibility as the first responder in the region, India’s neighbourhood first policy is faced with many challenges. It has not scored well like India’s other polices. Why? This article tries to review India’s ties with her neighbouring countries and to explain as to why India’s policy has not fared well in South Asia?

In the post-cold war era, India has scored many successes in her foreign policy front. With the ever-changing global strategic environment, India has diversified her foreign engagements both in terms geographical spaces as well as contents. India has developed close ties with the US and western world without diluting her strategic partnership with Russia. She has cultivated strategic partnership with Arab world and Israel at the same time. Her Look East policy has enabled her to expand her engagement in East Asia.  With membership of G-20, BRICS, SCO and other such for a, India has emerged as new balancing force in global affairs. She is now the fifth largest economy with desire to active role in shaping the emerging global world order. Amidst these success stories, however, India has not succeeded in managing her immediate neighbourhood as an emerging power. South Asia continues to be an Achilles heel for Indian foreign policy.

India faces many concerns in her neighbourhood.  In spite of India’s many policy interventions, China has succeeded making strategic inroads in India’s neighbourhood, diluting India’s influence and creating new security concerns for India. The rise of communist parties in Nepal and their close nexus with China has eroded the gains made by India over the decades. Sri Lanka has moved closer to China and playing a hide and seek game with India. Maldives’ Muizzu government, with ‘India Out’ agenda, has distanced itself from India and has moved closer to China recently. While Pakistan and China are known for their everlasting friendship, India’s diplomatic and economic investment in Afghanistan proved futile when Taliban assumed power on 15 August 2021. In view of ongoing civil war India and China are involved in a tug of war in Myanmar. As if this was not enough, the forced resignation of Sheikh Hasina as Prime Minister of Bangladesh on 5 August, 2024 in the wake of massive popular protests has raised new concerns in India. This is because the opposition political forces like Bangladesh nationalist party and Jamaat-e-Islami, which are part of new Interim government of Bangladesh, have already displayed their pro-China and pro-Pakistan orientation on many occasions.  Thus, at present, India faces a political instable, economically vulnerable and hostile neighbourhood.

India’s Policy framework in South Asia

This hostile neighbourhood environment has gradually evolved over past two decades in spite of India’s many policy interventions.  India’s South Asia policy aims at peace, stability and development in the region with close ties with her neighbours. Way back in 1997, India announced the Gujral Doctrine as a policy framework for India’s relations with her neighbours. The Gujral Doctrine consists of the five principles like respect for the territorial integrity and sovereignty of each nation, not allow the use of a nation’s territory to harm another in the region, non- interference in the internal affairs of other nations, peaceful resolution of disputes, and non-reciprocity on the part of India to give concession and accommodation to her neighbours. Though, these were basically the Panchsheel principles, but its striking feature was the principle of non-reciprocity, which obliges India to help and assist her neighbours without reciprocal expectations. It also focuses on conflict resolution and collective security in the region without the involvement of the external actors. The Gujral Doctrine aims at building a conflict-free cooperative South Asia and at the same time to build bridges of development cooperation with the neighbours of South Asia. Since one of its principal aims is to resolve conflicts, it has significant security dimensions. It believes in concepts of common security, equal security and cooperative security between and among the countries of South Asia, its neighbouring regions as well as their individual members.

The second major policy intervention is known as Neighbourhood First Policy, which is being implemented now. Though India conceived the Neighbourhood First policy in 2008, but it was articulated in 2014 during the first term of NDA regime. The policy underlines the need for giving priority to neighbours in India’s foreign policy engagements. India’s ‘Neighbourhood First policy’ guides its approach towards the management of relations with countries in its immediate neighbourhood, that is, Afghanistan, Bangladesh, Bhutan, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka. The Neighbourhood First policy, inter alia, is aimed at enhancing physical, digital and people to people connectivity across the region, as well as augmenting trade and commerce. This policy has evolved into an institutional priority for all the relevant arms of the Government managing relations and policies with our neighbourhood Soon after its articulation in 2014, it was under this policy, that PM Narendra Modi made his first external visit to Bhutan in June 2014, followed by a visit to Nepal in Augusts, 2014. A series of high- level visits have been made to the neighbouring countries to maintain the high-level exchange with these countries. It was under this policy that  heads of government of India’s neighbouring countries have been invited I three times in Prime Minister’s searing in ceremony in May, 2014, May 2019 and June  2024.

One of the key elements of India’s neighbourhood policy has been the promotion of development partnership with grant assistance and Lines of credit to neighbouring countries. On an average India’s 50 percent grant assistance goes to the neighbouring countries. The share of South Asian countries has gradually increased over the years. For example, in the Budget 2024-25, an amount of Rs 5667 crore has been allocated for foreign grant assistance by India for this financial year. Out of this allocation Rs 5027 crores have been given to India’s neighbouring countries. Rest of the amount of Rs 640 crore has been given to African and Latin American countries. This grant of assistance is distinct from the soft loans under the LoC (Lines of Credit) given to these countries for infrastructure development. For example, Bangladesh has been given $8 billion LoC since 2024 for the development projects. The focus has been on developing connectivity to facilitate and development. At present, there are 6 rail routes and five bus routes operational between India’s Kolkata/ Agartala and various locations in Bangladesh. India has constructed four integrated check posts on Indo-Nepal border as well as oil pipeline and rail network for strengthening cooperation between the two countries.  India provides 90 percent assistance to Bhutan for its five-year plans. Similarly, India has provided $3 billion development assistance to Afghanistan during 2001-2021 periods for implementing various major and minor development projects like Afghan Parliament House, Salma dam and Delaram-Jaranj highway.

Also, at regional level, in view of deadlock in the SAARC mechanism due to Pakistan’s non-cooperative attitude since 2026, India has given priority to strengthening BIMSTEC mechanisms. Since 2014, it four yearly summits have been held on regular basis in 2014, 2018 and 2022. During the 2022 Summit in Colombo, a new Charter of BIMSTEC has been drawn with new priority sectors to strengthen regional cooperation. It was also decided that its summit will be now held after every two years instead of four years which has been the case so far. Thus, the next summit of BIMSTEC is expected to be held in 2024 in Thailand. India has imparted due energy and assigned priority to BIMSTEC for regional cooperation with her neighbours. Presently, members are negotiating a free trade agreement to facilitate greater intra-regional trade and investment.

Why India’s Neighnourhood First Policy has not scored Well?

In spite of India’s generous grants in aid, Non-reciprocity and high-level frequent exchanges with neighbouring countries, why India’s Neighbourhood First Policy has not produced the desired outcome for India. The fundamental reason is that India’s policy framework continues to be the traditional assumptions with new designation, but the region of South Asia has come to face new challenges in last two decades or so. These two challenges are:

First, the dynamics of democratic domestic politics in neighbouring countries and,

Second, the China’s strategic necessity and inclinations to expand her strategic inroads in the region. Now China’s is not a casual visitor in South Asia (as was the case in cold war era) but it is a permanent strategic presence in the region. China needs to expand her strategic space in South Asia not only to counter India but also to emerge as a global power by the year 2049 (when it completes 1000 years of Communist revolution); which is the mandate of ‘China Dream’ as articulated by Chinese President Xi Jinping in 2013.

These two factors are not independent, but intersect closely as China hardly fails to utilize any fissure in domestic politics of these countries which goes against India. Thus, these two factors have created a vicious circle and complex cocktail, which nullify the gains of India’s non-reciprocal development cooperation centred regional strategy in South Asia.

Vicious Circle of Domestic Politics and Chinese Inroads in Neghbouring Countries

Traditionally India has been making political engagement with her neighbouring countries for the sake of freedom of people (Bangladesh, 1971), democracy (Nepal) stability of the government (Maldives, Operation Cactus, 1988). But now the domestic democratic landscape has drastically changed in neighbouring countries. In the year 2008, the three countries-Nepal, Maldives and Bhutan have opted for democratic politics. Now political power is intensely contested in these countries with involvement of people in the glare of modern means of communication. It becomes an easy slogan for political parties in these countries to browbeat India for its perceived or real interference in the internal affairs of countries the slogan of sovereignty and independence clicks amidst rising populist nationalism. Thus, the domestic politics in India’s neighbourhood has become binary and hotly contested. One political group is perceived to be supported by India while other one is automatically anti-India and pro-China. Thus, China gets new opportunity to spread its network and strategic inroads without any extra efforts.

Take the case of Maldives. The Maldivian Democratic Party led by Mohamed Nasheed became the first democratically elected President of Maldives. He followed friendly policies towards India. However, his government had to resign mid-term in February, 2013, following mounting popular protests. The opposition leader Yameen Abdul Gayoom won the second controversial elections in 2013. Gayoom was considered pro – China and his term (2013-18) saw China gaining economic and strategic foothold in Maldives. The third elections in Maldives were held and 2018 and pro-India MDP, this time led by Mohammed Solih gained the power. Solih regime (2018-2023) followed ‘India First’ policy and India’s relations with Maldives were further strengthened during this period. However, opposition leaders launched ‘India Out’ campaign to challenge the government policies. The tussle between the government and the opposition over India’s position started during the elections itself (Didi: 2022). During the fourth elections in September 2023, the People’s National Congress (PNC), led by Mayor of Male Mohamed Muizzu in coalition with the Progressive Party of Maldives (PPM) won the Presidential contest.  Now Muizzu is following pro-china policies, which has raised concerns in India.

In Nepal, Communist and Maoist parties rose in the wake of democratic movement. Since 2008, The Communist Party of Nepal has followed pro-China policy as and when they have come to power. Its leader KP Sharma Oli, the present Prime Minister of Nepal remained aligned with China and raised many controversial issues with India including the Kalapani- Lipulekh border dispute. India is still considered close to Nepali Congress, which have never got majority in Nepal on its own. The Communist regimes have fomented anti-India sentiments particularly after the 2016 agitation by Madhesis. Under Oli regime, Nepal joined China’s BRI in 2027 and signed transit agreement with China as an alternative to trade routes passing through India. Now China is poised to develop Trans-Himalayan connectivity with Nepal to make further inroads in Nepal. Chinese tourists have thronged Kathmandu and China has financed the teaching of Chinese language and Confucian ideology in Nepal.

The G-Z movement in Nepal in September, 2025 and subsequent formation of youth led government led by Balendra Shah in Nepal in March, 2026 has not shown any indication of change in anti-India stance of earlier government. The new government has also raised the issue of boundary dispute in Lipulekh-Kalapani region and invited British mediation to resolve this issue. India has protested and maintained that there is bilateral mechanism to resolve boundary dispute. India also underlined that India will not allow third party mediation in resolving boundary dispute.

Bhutan has experimented with limited constitutional democracy with the King as the respected head of the state. In Bhutan also the binary political groups are developing the pro India and anti-India tendencies. The ruling People’s Democratic Party (PDP) led by Tshering Tobgay is considered pro-India. In binary contested politics, it emerges that the opposition Bhutan Tendrel Party (BTP) will look other way. This tendency is largely subdued in Bhutan now due the heavy presence of monarchy in the political landscape of Bhutan. But sooner or later, Bhutan’s domestic politics will move in the direction of other neighbouring countries. Right now, Bhutan is facing tremendous pressure from China on boundary dispute to hand over strategic are Doklam to China in lieu of  China relinquishing her claims in northern and eastern areas. India would not like China to grab Doklam and it has conveyed its concerns during Bhutanese king’s two recent visits to India. Doklam, located at the tri-junction of Sikkim, Tibet and Bhutan holds strategic importance for India as it overlooks India’s vulnerable and narrow Siliguri Corridor, only highway linking mainland India with her North-Eastern region.

Afghanistan presents a different political scenario, but its domestic political dynamics has impacted India’s policy towards Afghanistan. Ever since the entry of American and NATO forces in Afghanistan in 2001, India has been supporting various political regimes in Afghanistan. India’s support ranged from political to development partnership. The Afghan government supported by India and the US was persistently challenged by Taliban for two decades. After the final withdrawal of US forces in 2021, Taliban captured power in August 2021 and the elected government was out of power in Afghanistan. It is very difficult for India to engage with Taliban regime due to its terrorist past, its authoritarian tendencies and poor human rights records. As Taliban gained power, Pakistan and China adopted a sympathetic attitude towards Taliban regime. Though presently there have been reports of differences between Pakistan and Taliban regime on many issues including the presence of Tehrik- i- Taliban Pakistan (TTP) terrorist groups in Afghanistan; which launches attacks against Pakistan from time to time. However, it does not make any difference to China’s position in Afghanistan. China has proposed the extension of China Pakistan Economic Corridor (CPEC) to Afghanistan and may be eventually to Iran in future. In nutshell, Taliban regime presents a new challenge to India’s neighbourhood policy arising from the domestic political dynamics of Afghanistan.

Sri Lanka is another case where domestic political consideration has undermined India’s neigbourhood policy. India and Sri Lanka had difference of perception on Tamil issue, which is sensitive matter for India’s domestic politics also. Due to rising Singhalese nationalism, India was projected as interfering in the internal affairs of Sri Lanka. The first Rajapaksa regime (2005-15) capitalized on anti-India feeling and developed strategic ties with China. During this period, the total Chinese investment in Sri Lanka reached nearly $6 billion. The significant infrastructure projects undertaken by China in Sri Lanka include Hambantota port, Katunayake-Colombo Expressway, the Norochcholai Coal Power Project, Maththala Airport, Colombo port city Project, 661-room Shangri La hotel and the Center for Performing Arts in Colombo. Sri Lanka has handed over Humbantota port to China on 99-year lease in 2017 as she was not able to play loans installments to China. The Hambantota would allow China to have dominance over a vast area of the Indian Ocean extending from Australia in the east, Africa in the west and up to Antarctica in the south.  One noticeable feature of Chinese investment is that is always done by government backed companies with mixed economic and strategic motives. Profit motive comes last for the Chinese companies. The priority of the state backed Chinese Company is to look towards aspects like strategic advantages, diplomatic mileage and goodwill gained through projects. When Sri Lanka faced worst economic crisis in 2022, India was quick to advance financial assistance and supply of essential commodities. But we often hear that Chinese research ships are submarines have docked in Sri Lankan ports. With Sri Lanka and Maldives both closely aligned with China, India’s regional initiatives such as four nations Colombo Security Conclave (India, Sri Lanka, Maldives and Mauritius) established in 2020, faces uncertain future.

Bangladesh has become the latest case where domestic politics has potential to undermine India’s New Neighbourhood Policy in future. The forced resignation of Awami League’s Premier Sheikh Hasina on 5 August, 2024 in the wake of mass protests launched by students has raised new concerns in India as Sheikh Hasina and her Awami League party are considered friendly to India. The rise of opposition forces like BNP and Jamaat-e- Islami in  Bangladesh may pose many challenges for Indian policy makers in China as both these groups are considered pro-China as well as pro-Pakistan. Mohammad Yunus, the head of the Interim Government in Bangladesh has commented that it is not right for India to shelter Sheikh Hasina, who flew to India on 5 August, 2024 and presently living in India. The change of regime in Bangladesh after a gap of 16 years may pose new problems for India like the security of long border, safety of minority Hindu population in Bangladesh, slow-down in the trade, investment, development partnership and the connectivity project, and the new opportunity to China to make strategic forays very near to India’s border.

The formation of new government in Bangladesh in February, 2026  by the BNP led by Tarique Rahman has further strained relations between the two nations. Rahman visited China on 22-26 June, 2026 and signed number of agreements including strategically important Teesta water management project and Bangladesh- Myanmar-China economic Corridor by passing India. These issues have caused concern in India.

Conclusion

The fundamental challenge for India’s neighbourhood policy is the changing strategic landscape in the neghbourhood due to the permanent presence of China facilitated by the domestic political conditions in neighbouring countries. Domestic political space in India’s neighbourhood displays the China Vs India orientations. China has emerged as a viable alternative for India’s neighbours in terms of source of trade and investment, financial resources, strategic protection and political legitimacy. This is the sheer coincidence of history that China and India are making their rise simultaneously and they share the same space to rise. Though, the leaders of China have asserted many times in last decade that there is enough space for both China and India to expand. But China’s rise and presence in South Asia attests the fact that the enough space is intensely contested by both India and China at least in this part of the world. This new reality has not received due attention from the Indian policy makers in South Asia. India’s non-reciprocal development partnership and high-level engagement centred diplomacy is not likely to cut much ice in the changed landscape in South Asia. India needs to widen the net of China hedging to include South Asia also. Also, the sensitivity of domestic politics of neghbouring countries has to be addressed in balanced manner.