India’s window of opportunity to counter China’s influence in South Asia
18 Aug 2022|

Political dynamics in South Asia have been garnering fresh attention this year. In Sri Lanka, a severe economic crisis led to widespread protests in April, followed by the departure of President Gotabaya Rajapaksa in early July and a declaration of a state of emergency. Pakistan and Bangladesh have reached out to the International Monetary Fund for loans to help stabilise their depleting foreign exchange reserves.

Indian public discourse on events in Sri Lanka has prompted renewed attention on problematic Chinese loans as a cause of the region’s economic woes, emphasising New Delhi’s potential as the more reliable partner. The broader geopolitical focus on Indo-Pacific cooperative frameworks also pitches India as the dominant power in South Asia.

So, does the current crisis offer a window of opportunity for India to reassert its presence in South Asia? Both the question and the probable answers are complex.

Home to nearly two billion people and some of the world’s most dynamic economies, South Asia is critical to geopolitical considerations in the Indo-Pacific. South Asia’s maritime potential is of increasing importance to larger strategic constructs and has become an area of contestation between small and big powers alike. With the Belt and Road Initiative, China has gradually broadened its relationships in South Asia. But this, along with continuing acrimony on the India–China border, places Beijing in direct contest with New Delhi’s regional aspirations, expressed in Prime Minister Narendra Modi’s ‘neighbourhood first’ policy.

Launched with much fanfare in 2014, the policy has faltered, owing to the slow pace of economic projects, among other issues. Driven by the desire to reduce their dependence on India and to pursue independent foreign and economic policies, most of India’s South Asian neighbours (except Bhutan) joined the BRI. Pakistan was the first to sign on. A debilitating economic blockade by India in 2015 prompted Nepal to join in 2016, followed closely by Bangladesh and Sri Lanka, each seeking diversified economic prospects. Chinese projects are also attractive for South Asian states that see engagement with China as a hedge against traditional Indian dominance in the region.

India and China compete in South Asia to offer technical assistance and investments in infrastructure. The focus is on building connectivity via rail, road and sea to augment trade and security capabilities of small South Asian states.

Indian economic initiatives in Nepal, for instance, centre on connectivity and hydroelectric power projects. Managing the open India–Nepal border with the development of integrated border checkposts to aid the movement of goods and services is also critical. In Bangladesh, too, India’s lines of credit worth US$8 billion have contributed to several connectivity initiatives. Hybrid power projects, including wind farms, have been of interest to Sri Lanka, aided by Indian investments. Maritime cooperation and the development of coastal security infrastructure has been a focus for India’s cooperation with Maldives and Sri Lanka, which occupy a significant place in Modi’s Indian Ocean maritime strategy known as SAGAR (Security and Growth for All in the Region).

Chinese initiatives in South Asia have been along similar lines. While Pakistan has benefited significantly from its involvement in the China–Pakistan Economic Corridor, since 2015, China has stepped up its efforts in Nepal and Bangladesh. In 2018, China and Nepal agreed on the Trans-Himalayan Multi-Dimensional Transport Network to boost cross-border connectivity of railway, road and transmission lines. China granted Nepal access to several of its land and sea ports, particularly important given Nepal’s landlocked status. China is currently Bangladesh’s biggest trading partner and is reported to have invested an estimated US$9.75 billion in transportation projects in Bangladesh between 2009 and 2019. China has also emerged as Sri Lanka’s biggest trading partner and one of its largest creditors, accounting for about 10% of the country’s total foreign debt. Chinese funding was used to build roads, ports and airports. Sri Lanka and Bangladesh are also vital nodes in China’s Maritime Silk Road project.

To establish itself as the more reliable partner, India often asserts its cultural and historical links to South Asian states, with an emphasis on ‘common heritage and shared values’, or a ‘shared history’ in the case of Bangladesh. Covid-19 provided a further platform for India to outdo China’s efforts in the region. As China’s global reputation suffered at the height of the pandemic, India supplied crucial vaccines to South Asian states, except Pakistan, generating significant goodwill in the region.

There are, however, challenges to India’s neighbourhood policy. The cost of trading between India and South Asia remains high due to a lack of appropriate trade facilitation and logistical difficulties. Indian policy is often reactive to China’s rising influence, and policy mechanisms are insufficient to maintain a consistent level of engagement. For example, the inter-ministerial coordination group organised to promote relations between India and its neighbours met for the first time only this year. New Delhi has also ignored the recommendations of a bilateral report aimed at resolving tensions between India and Nepal.

India’s trust deficit in the region is another major impediment. Anti-India sentiment is common in South Asia, particularly in Nepal, Bangladesh and Maldives. Memories of India’s border blockades in Nepal and its interference in domestic political affairs in Nepal, Sri Lanka and Maldives are detrimental to the Indian case. The recent increase in religious polarisation and the revivalist nationalist ideas expressed in flippant statements by Indian political leaders have also fuelled worries in South Asian states.

So, I ask the question again, is this the right time for India to reassert its influence in South Asia? Yes, but not unless some of the structural problems are addressed. While South Asian neighbours are concerned about incurring large debts to Beijing, as in the cases of Pakistan and Sri Lanka, the historical baggage of being India’s ‘backyard’ makes them equally apprehensive of India’s dominance. The countries of the region play, to different degrees, the so-called China card against India—a trend that’s likely to continue, despite Indian efforts.