For much of the post-independence period, India has been the undisputed hegemonic power in South Asia. Geographical contiguity, historical familiarity, economic interdependence, cultural proximity, and security linkages combined to give New Delhi a position of structural dominance in its immediate neighbourhood. India was the principal market, transit route, security provider, and diplomatic reference point for most South Asian states. This primacy was rarely formalised, but it was widely recognised and largely uncontested.
That regional order has gradually but decisively changed. Over the past decade, South Asia has emerged as one of the most actively contested theatres of twenty-first-century geopolitics. Infrastructure finance, ports, power grids, roads, and digital connectivity now shape political alignments as much as traditional diplomacy. China’s expanding economic footprint—most visibly through the Belt and Road Initiative (BRI)—has entered spaces that once fell naturally within India’s sphere of influence.
China’s entry has not displaced India, but it has fundamentally altered how power operates in the region. By offering large-scale financing, rapid execution, and ready infrastructure, Beijing has expanded the strategic choices available to South Asian governments. This has enabled them to hedge, bargain, and diversify partnerships rather than align hierarchically. The neighbourhood India once dominated through structural dependence is now more transactional, with autonomy prized alongside assistance and reassurance.
This shift is the outcome of a deliberate Chinese strategy rather than an accidental by-product of trade. South Asia occupies a strategic crossroads linking the Middle East, Central Asia, and Southeast Asia, making it central to both the Silk Road Economic Belt and the Twenty-First Century Maritime Silk Road. Since the launch of the BRI in 2013, China has invested tens of billions of dollars across the region. World Bank estimates place Chinese lending to South Asia at roughly 48 billion USD. With the exception of India and Bhutan, every country in the region has formally joined the BRI. China has also emerged as the largest trading partner for most South Asian states, with total trade approaching 200 billion USD in 2024.
Economic engagement has been accompanied by deeper institutional penetration. Through arms exports and concessional loans tied to defence procurement, China has embedded itself within both civilian and military establishments, particularly in fiscally stressed or security-dependent states. Infrastructure, trade, and defence have thus functioned as mutually reinforcing instruments of influence.
Pakistan remains the cornerstone of China’s South Asia strategy. The China–Pakistan Economic Corridor (CPEC), described by Beijing as the BRI’s “flagship” project, involves investments exceeding 60 billion USD. Linking China’s Xinjiang province to the Arabian Sea via Gwadar, the corridor reduces China’s reliance on the Strait of Malacca and extends its strategic reach into the Indian Ocean. While Gwadar’s commercial performance remains modest—handling less than one per cent of Pakistan’s trade—its strategic value far outweighs its economic returns. At the same time, progress under CPEC has been uneven. Of the roughly 62 billion USD pledged, only about 28 billion USD has been realised, constrained by security challenges, financial stress, and domestic opposition. China has responded not by retreating, but by recalibrating timelines, signalling long-term intent rather than short-term gain.
India’s response to Pakistan-centric Chinese projects has been firm but indirect. New Delhi has rejected participation in the BRI on sovereignty grounds, particularly because CPEC passes through Pakistan-occupied Kashmir. Indian officials have consistently argued that connectivity initiatives must respect territorial integrity, positioning India as a norm-setter rather than a direct counter-builder.
Sri Lanka’s Hambantota port offers the classic case of China’s debt-linked influence. Faced with acute fiscal stress, Colombo leased this strategically located port to a Chinese company on a 99-year lease after being unable to service loans. Chinese firms now dominate several major infrastructure projects, and China holds more than half of Sri Lanka’s bilateral foreign debt. These developments generated intense domestic debate over sovereignty and strategic exposure. India’s response during Sri Lanka’s 2022 economic collapse marked a turning point. New Delhi extended more than four billion USD in emergency assistance, including currency swaps, fuel credit lines, food support, and deferred repayments—exceeding the scale of initial IMF assistance. Sri Lanka’s subsequent repayment of 300 million USD to India from IMF funds became a symbolic affirmation of confidence and trust.
Bangladesh presents a subtler pattern of strategic balancing. Chinese firms have been deeply involved in power generation, ports, bridges, and industrial zones, while Beijing has emerged as a major trading partner. India, however, remains central to Bangladesh’s connectivity, security cooperation, and people-to-people ties. New Delhi has extended approximately eight billion USD in lines of credit for railways, roads, ports, and power projects, though implementation delays have limited their visibility. Political uncertainty following the change of government in 2024 led to renewed outreach to China and sharper anti-India rhetoric. Yet Bangladesh continues to rely structurally on India for transit access, regional security, and crisis support, reflecting hedging rather than realignment.
Nepal has increasingly used China as a counterweight to India, embracing Chinese investment in highways, hydropower, and cross-border connectivity. Faster execution of Chinese-backed projects has reinforced perceptions of efficiency, even as Nepal remains structurally dependent on India for trade and transit—an enduring reminder that geography still sets limits on strategic choice. Bhutan, traditionally India’s closest partner, has also felt growing Chinese pressure along its northern border. Though it has stayed outside the BRI, Bhutan’s cautious engagement with Beijing signals a shifting strategic environment, even as India continues to anchor its development and security needs.
The Maldives illustrates how domestic politics intersect with strategic geography. Chinese financing has supported major infrastructure projects, while political rhetoric initially signalled a distancing from India. Mounting debt pressures, however, forced recalibration. India’s approval of emergency loans and repayment extensions in 2024 helped avert default, reaffirming its role as a stabilising partner in times of crisis.
India’s response to China’s expanding footprint has been shaped less by rivalry and more by constraint. New Delhi lacks the financial depth to underwrite large-scale infrastructure through state-backed lending. Rather than pursuing headline-grabbing counter-projects, India has adopted a calibrated strategy that brings political reassurance while avoiding overt confrontation.
At the core of this approach lies the Neighbourhood First policy, which seeks to rebuild trust through development assistance, capacity-building, and sustained diplomatic engagement. India’s lines of credit have focused on demand-driven projects with visible domestic impact rather than debt-heavy megaprojects. India has also promoted alternative connectivity frameworks that emphasise sovereignty and sustainability. The Chabahar port, where India committed over 500 million USD, provides access to Afghanistan and Central Asia without transiting Pakistan and serves as a strategic counterpoint to Gwadar. Initiatives such as the International North–South Transport Corridor and the SAGAR vision aim to integrate South Asia with wider regional supply chains without creating exclusive dependencies.
India’s most consistent advantage, however, lies in crisis diplomacy. From humanitarian assistance to economic stabilisation, New Delhi has repeatedly acted as the first responder. India delivers assistance faster and with fewer political conditions than external partners, translating goodwill into strategic credibility. Thus, China builds infrastructure, India builds reassurance.
South Asia today is no longer a region of automatic alignments. China’s expanding economic footprint has reshaped regional choices, offering speed and scale alongside long-term risks. India’s task is not to outspend China, but to sustain influence through reliability in delivery. In a neighbourhood that increasingly values autonomy, influence can no longer be assumed—it must be earned, renewed, and sustained.
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