“Many of the concepts and theories regarding South Asian relations analyzing the problems of South Asia broke down when examined regarding their adequacy to realities.”
– Dr. Gunar Myrdal’s Asian Drama- An Enquiry into the Poverty of Nations, observing the collapse of established theories of South Asian relations, under real world scrutiny, succumbing to contemporary diplomatic realities.
The ‘Neighborhood First’ policy was introduced in 2008 with the objective of fostering strong and cooperative ties with India’s neighbours. Its main is to mutually benefit the citizens living on either side of the border, including but not limited to regional connectivity, infrastructure development and trade, with a boost up to $35 billion in regional trade over the next 14 years. Fostering global goodwill, through humanitarian aid and assistance, has been vital in helping India develop a people-oriented approach to its foreign policy while promoting the establishment of scholarship and training programs and growing digital and telemedicine initiatives with its neighbors has also contributed to these goals. When asked about India’s foreign policy in the Indian Parliament External Affairs Minister Subramaniam Jaishankar responded that “India engages with these countries on a consultative, non-reciprocal and outcome-oriented basis, driven by the principles of Samman (respect), Samvad (dialogue), Shanti (peace), and Samriddhi (prosperity).”
The country’s approach realizes its goals by providing asymmetric support through dialogue-driven projects from energy grids to infrastructure, creating shared stakes for harmony and progress. India is the fourth-largest economy in the world and is set to be the third-largest by 2030. As a flourishing economy in South Asia, it is imperative for India to invest in developing relations with its neighbors. India is constantly investing in infrastructure projects ranging from megastructures, such as the India-Bangladesh Maitree Super Thermal Power Project in Bangladesh—a 1,320 MW coal-based plant developed by NTPC (India) and BPDB (Bangladesh), to community-specific programs. Such investments extend not only monetary support but also humanitarian assistance. For example, the $4 billion in assistance that India sent to Sri Lanka at the apogee of the island country’s economic crisis in 2022 helped provide food, fuel, and medical aid.
The Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement (BBIN MVA) is another good example of regional cooperation. This motor-vehicle agreement empowers connectivity. Implementing the Motor Vehicles Agreement (MVA) through the finalization of the Passenger and Cargo Protocol will enhance trade and strengthen people-to-people connectivity among BBIN nations. Of late, China has also taken an interest in Bhutanese standing. It does not have diplomatic relations with the latter, and the 470 kilometer boundary is un-demarcated between China and Bhutan. India has a strategic interest in any border settlement that could affect its national defense, which has lead the country to counter Chinese influence in the vulnerable Siliguri corridor and establish trusted partnerships in sensitive zones. Bhutanese sensitivity towards India’s concerns, rising from their dependence on India acting as a support to the nation, provides for significant achievement with regard to India’s objective of the policy.
As in Nepal, India’s role in the development of Bhutan is crucial, with trade having increased from $484 million in 2014-15 to $1.422 billion in 2021-22 and constituting about 80% of Bhutan’s overall trade. India is Bhutan’s leading source of Foreign Direct Investment (FDI), accounting for more than 50% of the country’s total FDI. Bhutan also tops India’s foreign aid list, with a significant allocation of ₹2,150 crore for 2025-26, up from ₹2,068 crore last year. These allocated funds focus on infrastructural development and realizing hydropower projects.
India also shows the flexibility of its regional approach in the case of Bangladesh. India has played a key role during the COVID-19 pandemic by supplying aid and vaccines under the Vaccine Maitri Scheme. The country also provides development assistance through concessional Lines of Credit (LOCs) under the Indian Development and Economic Assistance Scheme (IDEAS). This is facilitated by the Exim Bank of India. In the past 8 years, India has spent approximately $8 billion on Lines of Credit (LOC) for Bangladesh’s development, fostering a regional relationship. At the advent of relations during the formation of its eastern neighbor, political tension with India abounded after a shift in territorial boundaries and the creation of a new state, thereby shaking India’s backing and eroding political trust. Nonetheless, the transformation in relations with Bangladesh over the last decade has been significant in developing the two countries and marks a pivot in regional connectivity.
Further south, India has raised its financial assistance to the Maldives from ₹470 to ₹600 crore as per its 2025 financial budget. This increase comes as the Maldives works to improve ties with India after tensions arose due to President Mohamed Muizzu’s pro-China approach. While Muizzu had intended to enhance the Maldives Free Trade Agreement following his election, the recent visit of Maldivian Defense Minister Ghassan Maumoon to India in 2025 reflects ongoing efforts to strengthen bilateral cooperation with India instead. This includes but not limited to the Greater Malé connectivity project to connecting Malé with the islands of Villingili, Gulhifalhu, and Thilafushi using Indian assistance, the Ekatha Harbor development project, and the repair facility at Sifavaru in Uthuru Thila Falhu (UTF) atoll aiming at bolstering the operational capabilities of the Maldives National Defence Force (MNDF) with the latter two using Indian support as well.
It is true that China has dominated South Asia for a considerable period of time not least due to its hard power capabilities, trade establishment, massive land area, population, military, and robust domestic economy. The country, which boasts of the second largest military power globally and has the largest standing army with over 2 million personnel, is naturally a dominant military power in Asia. India has historically feared that China may initiate a political upheaval in South Asia against India, and it has focused on fostering relations with its weaker economic neighbors by way of its policies and understandings as a result. Its steady involvement in the progressive affairs of several nations in the region can help facilitate united growth and development. In the future, India could pose as a unifying power against China.
Indian policymakers, throughout the history of independence, have been strategic when molding their policy relations with all countries with special emphasis on their neighbors. Following the ‘Indira Method’ of beneficial bilateralism (a foreign policy approach adopted during the 1970s and early 1980s, establishing India’s primacy in South Asia) and the Rajiv Gandhian way of domination in the late 1980s, a more modern, interventionist, and technocratic style of asserting India’s influence in the region has taken root. This new approach is characterized by a blend of hard diplomacy and peacekeeping. That being said, India has always kept its goal simple: be in mutual gain with its neighbors.
Undoubtedly, the challenges India faces in its neighborhood have grown more intricate over the past two decades. The country has been vocal about its unsolved ‘neighborly’ problems such as that of Kashmir, illegal infiltration from its south-eastern borders. Indian diplomats, through dialogue and multilateral talks, have been successful in mitigating the extent of conflict and mistrust that follows. The Neighborhood First Policy must prioritize sustained engagement at all levels, including political dialogue and people-to-people interactions. Strengthening regional connectivity such as in the case of India-Nepal-Bangladesh multimodal transport corridor, enhancing this corridor including rail, land and inland waterways should be the primary focus. On the other hand, security concerns must be tackled through cost-effective, efficient, and globally-proven technological solutions, including nuclear-nonproliferation technology and satellite-based monitoring. In its entirety, India’s ‘Neighborhood First’ policy has helped it to enhance economic integration through trade and infrastructure. Such policies show the nation’s ethics and mores while demonstrating inclusivity and a flexible, proactive, and pragmatic approach towards diplomacy.
Featured/Headline Image Caption and Citation: Buddha Head in Tree Roots, Wat Mahathat, Image sourced from Flickr | CC License, no changes made