The pilot’s tower at Colombo port, in Sri Lanka’s capital, provides a telling snapshot of India’s struggle with China in South Asia. To the east lie the berths where Indian and Chinese warships often dock, a port official explains. Southwards sits the Chinese-operated container terminal that was an early part of China’s Belt and Road plan. Next door, to the west, is where India’s Adani Group is building another terminal which, in 2023, won $553m of American government funding.
When that deal was unveiled, it was hailed as a showcase of co-operation to counter Chinese influence, which had been spreading in the region through trade, arms sales and infrastructure projects. India was pushing back in other ways too, granting neighbours relief from covid-19 and from debt problems linked to Chinese loans. “India is no longer losing—and may even be winning—its strategic competition with China,” wrote the Rand Corporation, a think-tank, in 2023.
Yet as Narendra Modi, India’s prime minister, prepares to visit Washington this month, his regional scorecard looks patchy at best. In the last 18 months, India-friendly leaders have been ousted in the Maldives, Nepal, Bangladesh and Sri Lanka. Bangladesh, especially, is tilting towards China. And several regional Adani projects are mired in controversy following those upheavals and American bribery allegations against its chairman, Gautam Adani (who denies wrongdoing). On December 11th, the firm said it would no longer use America’s loan for the Colombo port.
The to-and-fro is partly because regional leaders are playing Asia’s giants against each other. But it also stems from poor diplomacy. That raises tough questions for India, whose geographical and cultural links give it a natural edge. Moreover, Mr Modi adopted a “neighbourhood first” policy in 2014. Within India’s security and diplomatic elite, some fear a lack of vision and cohesion is thwarting potential gains in a period of relative Chinese weakness.
It is a worry, too, for America and other governments banking on India to help constrain China. Many Western officials fear that India’s regional diplomacy often backfires or conflicts with their own. Some say it mirrors China’s behaviour by backing despots, promoting opaque business deals and stirring chauvinistic nationalism at home. Donald Trump’s return to the White House adds new challenges, too.
Take Bangladesh, the biggest regional “swing state”. (Pakistan has long been in China’s camp.) India was a staunch supporter of Sheikh Hasina, Bangladesh’s prime minister from 2009 to 2024, and turned a blind eye to her increasingly autocratic rule. Indian officials even lobbied America to tone down criticism of her record, warning that Bangladesh could be overwhelmed by Islamist extremists.
For a while, India’s approach worked. Trade, infrastructure and security ties flourished. Bangladesh expanded links with China, but deferred to India on security. Then, in August 2024, India’s gamble backfired. Sheikh Hasina was deposed by student-led protests and fled to India. Anti-Indian sentiment is now widespread in Bangladesh; many Indians are outraged by reports of attacks on Bangladesh’s Hindus.
China, meanwhile, is exploiting any strategic openings despite scaling back its Belt and Road infrastructure push, and despite resolving a four-year border standoff with India in October. China has already pledged $2bn in financial aid for Bangladesh and is discussing $5bn more, says Touhid Hossain, Bangladesh’s interim foreign minister. Visiting Beijing in January, he requested more and China extended the term of some loans. Both sides also committed to infrastructure projects and discussed a Chinese proposal to develop Mongla port (Bangladesh’s second-biggest). India bid for that under Sheikh Hasina as part of efforts to match the network of Chinese-controlled Indian Ocean ports.
This was not just an Indian intelligence failure: it exposed an outdated approach to the region. For decades, India has largely backed whoever is in power so long as they furthered its security interests. Mr Modi built on that but relied more on economic muscle, using generous aid (including $4bn for Sri Lanka after its debt default in 2022) but also stiffer penalties such as an unofficial blockade of Nepal in 2015.
Indian officials say the approach is working. They cite their outreach to Sri Lanka’s new president, whose first foreign trip was to India, despite his party’s historic links to China. They also persuaded the Maldives’ new leader to reverse the “anti-India” stance of his election campaign. As for Bangladesh, they do little to quell unfounded Indian media chatter that America engineered Sheikh Hasina’s downfall.
In recent weeks, however, senior Indian diplomatic and security figures have called for a rethink. They say India has been too heavy-handed and, like China, failed to nurture links to opposition parties and civil society or promote a common sense of values and identity. Some connect those to Mr Modi’s hostility to political opponents and non-governmental organisations; his Hindu nationalism often backfires too (especially in Muslim-majority Bangladesh).
“The world has changed very fast,” says Shivshankar Menon, a former foreign secretary. “But we’re still doing what worked earlier and expecting the same result.” India, he says, should concentrate on economic integration and stop seeking reciprocity from weaker neighbours. Others want greater focus on the region’s young people, getting more to study in India. Shyam Saran, another former foreign secretary, says India needs more diplomats dealing with the region and more involvement by local governments in border areas.
Indian diplomats have been nimbler with Sri Lanka. But its president, Anura Kumara Dissanayake, is still hedging. Visiting China in January, he agreed to fast-track a $3.7bn Chinese plan for an oil refinery alongside a Chinese-owned port in southern Sri Lanka that India considers a potential military threat. He has lifted a moratorium on visits by foreign research ships that was imposed after India protested about such visits by Chinese vessels.
He also adopted China’s preferred wording, referring to Tibet as “Xizang” (its Mandarin name) and backing “all” China’s efforts to achieve unification with Taiwan. Nepal’s prime minister, K.P. Sharma Oli, used similar wording when he visited China in December and agreed to deepen economic ties. Ranjit Rae, a former Indian ambassador to Nepal, faults India for neither building cross-party ties nor inviting Mr Oli to visit after his appointment in July.
Another worry for India is its reliance on Adani (whose chairman is close to Mr Modi) in competing for infrastructure projects. In 2017 Adani signed a 25-year deal to supply electricity to Bangladesh. In Sri Lanka, it won the Colombo port contract and a wind-power deal, both without open tenders. In Nepal, it has lobbied to build one airport and operate three. Bangladesh now wants to renegotiate the power deal, alleging it involves inflated prices (Adani has said the company has upheld all its contractual obligations). Sri Lanka is reviewing the wind deal on similar grounds.
Underlying all these problems is a more fundamental one. Mr Modi promotes India as an emerging world power and a champion of the global south. Yet officials across the region say it is still unclear what India stands for in its own backyard. Until it defines that, sceptical neighbours will continue to hedge their bets. And China will reap the rewards.■
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