India’s Neighbourhood Policy (UPSC International Relations)

South Asia is the least integrated region in the world — less than 5% of trade is intra-regional (compared to 25% in ASEAN and 60% in the EU). India occupies about 72% of its landmass, 75% of its GDP, and 75% of its population. That asymmetry explains both India's opportunity and its burden in the neighbourhood. Neighbourhood First is the current organising policy, complemented by SAGAR for the maritime periphery. For UPSC GS II, this topic tests how India manages asymmetry, China in South Asia, SAARC's paralysis, BIMSTEC's rise, and connectivity diplomacy.

Features of India's neighbourhood

• Colonial baggage — most borders drawn by departing imperial powers.
• Largest population cluster on earth — roughly 2 billion people.
• Deep diversity — Buddhist, Hindu, Muslim, Christian majorities; dozens of linguistic groups.
• Unsettled borders — Kashmir, LAC, Durand Line, Kachchatheevu, Siliguri, Teesta, and many tripoints.
• Weak regional institutions — SAARC dysfunctional; BIMSTEC rising; BBIN operational but partial.
• Geopolitical competition — China, US, Russia, Gulf states and Turkey now active across the region.
• Low human development — South Asia still lags behind ASEAN and Latin America on most indicators.

New dynamics

China's rise

• String of Pearls — ports in Hambantota (Sri Lanka), Kyaukphyu (Myanmar), Gwadar (Pakistan), Djibouti.
• BRI — every South Asian country except India and Bhutan has signed on.
• Debt diplomacy — Sri Lanka's 2022 default triggered by Chinese-backed white-elephant projects.
• Territorial claims — Ladakh, Arunachal, Bhutan's Sakteng, Nepal border.
• Infrastructure edge — quality roads, rail, Xiaokang villages along LAC.

Pakistan's decoupling

• India-Pakistan trade and diplomatic ties have been frozen since 2019 Pulwama/Balakot and the Article 370 abrogation.
• Pakistan's domestic fragility, IMF bailouts, and TTP violence.

Small states' agency

Bhutan, Nepal, Maldives, Sri Lanka have all learned to play India and China off each other, maximising bargaining power.

India's responses

Neighbourhood First Policy

Launched with PM Modi inviting SAARC leaders to his 2014 swearing-in. Principles:

• Non-reciprocal, consultative, outcome-oriented.
• Focus on connectivity, infrastructure, people-to-people contact.
• Flexibility — India often gives more than it receives.

SAGAR doctrine

Security and Growth for All in the Region (Mauritius, 2015) — India positions itself as a net security provider in the Indian Ocean with capacity-building for IOR states.

Connectivity

Regional groupings

• SAARC — stalled since 2016 Pakistan-hosted summit cancellation.
• BIMSTEC — revived as the preferred platform; 2022 Charter adopted.
• BBIN — Nepal and Bangladesh bilaterally operationalising Motor Vehicles Agreement without Bhutan.
• IORA — Indian Ocean Rim Association, 23 members.

Welcoming US counter-China

India backs US-Maldives military dialogue, Millennium Challenge Corporation grants in Bhutan, Nepal, Sri Lanka, and Quad engagement in the Bay of Bengal.

Country-by-country contours

• Bangladesh — strong cooperation under Hasina (2009-24); post-August 2024 political transition under Yunus raises questions.
• Bhutan — deepest bilateral, but Gelephu Mindfulness City and border talks with China watched carefully.
• Nepal — equidistance preference; border dispute at Kalapani; power trade growing.
• Sri Lanka — post-2022 IMF recovery; India became the key creditor cooperator; Adani port and renewable deals.
• Maldives — Muizzu's "India Out" phase softened by 2024; new currency support package.
• Myanmar — coup, civil war, refugees, Kaladan delays.
• Afghanistan — Taliban back; India engages with a technical mission and humanitarian aid.
• Pakistan — effectively frozen; trade zero; only incidents.

Challenges

• Anti-India narratives in domestic politics of neighbours.
• Delivery gap — project implementation is slow compared with Chinese execution.
• Boundary issues — Kalapani (Nepal), Teesta (Bangladesh), FMR (Myanmar), Kachchatheevu (Sri Lanka).
• Energy water diplomacy — Indus, Ganga, Mahakali, Kushiyara all politically loaded.
• Refugee flows — Rohingya, Myanmar junta resisters, Afghan minorities.

Latest developments (2024-26)

• G20 New Delhi (2023) — India projected Global South leadership; neighbours (Bangladesh, Sri Lanka, Nepal) invited as guests.
• Quad Summit Wilmington (2024) — Bay of Bengal maritime MDA expanded.
• BRICS expansion (2024) — UAE, Egypt, Iran, Ethiopia joined.
• Bangladesh political transition (Aug 2024) — Yunus interim government.
• Maldives thaw (2024) — Muizzu's India visit, currency swap.
• Sri Lanka debt restructuring (2024) — India key to IMF EFF programme.
• Nepal power export touched 1,000 MW to India; tripartite Bangladesh-India-Nepal power trade operational.
• Bhutan — PM Modi received Order of the Druk Gyalpo; INR 10,000 crore support package.
• Myanmar — FMR suspended (Feb 2024); Arakan Army advances threaten Kaladan.
• Red Sea crisis (2024) — Andaman Sea and Sittwe became more strategically valuable.
• Operation Sindhu Thakur and related NEOs — South Asian diaspora evacuation frameworks updated.
• Israel-Hamas conflict and Russia-Ukraine update — neighbours asked to pick sides; India navigated multi-alignment.
• AI Action Summit Paris (2025) — India pushed inclusive AI for Global South, aligning with neighbours' positions.

Way forward

1. Process not event — sustained, quiet engagement at multiple levels.
2. Project delivery — fast-track committed LoC and grant projects.
3. Connectivity as the spine — rail, road, waterway, power, digital.
4. Cultural soft power — Buddhist circuit, Hindi cinema, cricket.
5. Don't abandon SAARC — keep it on life support; if India exits, China may fill the gap.
6. Address internal optics — domestic rhetoric (CAA, NRC) has neighbourhood costs.
7. Manage China plurally — collaborate where possible (climate), compete firmly where necessary (infrastructure, defence).

SAARC vs BIMSTEC

Comparing India and China's regional approach

Institutional mechanisms

Soft power deployment

India's neighbourhood soft power toolkit includes:

• Buddhist circuit — Bodh Gaya, Sarnath, Nalanda, Kushinagar; pilgrimage diplomacy with Thailand, Japan, Sri Lanka.
• Yoga and Ayurveda — International Day of Yoga adopted by 177 UN members in 2014.
• Films, music, cuisine — unmatched cultural resonance, particularly with Bangladesh, Nepal, Pakistan (historically), Sri Lanka.
• Cricket and sports diplomacy.
• Education — ICCR scholarships, IITs, AIIMS training.
• Digital public goods — UPI, CoWIN, ONDC exported across South Asia.

Financing neighbourhood diplomacy

India's "Aid to Neighbours" budget head — distinct from MEA operational funds — funds Lines of Credit, grants, and technical assistance. Roughly ₹6,800 crore in FY24-25 across Bhutan, Nepal, Bangladesh, Sri Lanka, Maldives, Afghanistan, Mongolia, Seychelles, and Mauritius.

UPSC Relevance

Neighbourhood First is a GS II evergreen — India and its neighbourhood, effect of policies of neighbouring countries on India's interests. Prelims has asked about SAARC, BIMSTEC, BBIN, IORA, SAGAR. Mains prompts rotate between China's rise in South Asia, connectivity diplomacy, and Bangladesh/Maldives/Nepal specifics.

Practice question (Mains): "A region shaped by two major powers will never follow a linear trajectory." Discuss India's Neighbourhood First policy in the light of rising Chinese influence. (250 words)

Watch on YouTube

Related video from the Anantam IAS YouTube channel.

India and the Emerging Challenges in the Neighbourhood