Introduction
On 3 June 2024, Indian Prime Minister Narendra Modi took oath for the third consecutive term, with leaders from South Asian neighbours, such as the prime ministers of Bangladesh, Nepal, and Bhutan and the presidents of Sri Lanka and the Maldives, in attendance at the inaugural ceremony.[1] Extending invitations to these leaders for the third consecutive term indicated commitment to the principle of ‘Neighbourhood First’—a crucial aspect of Modi’s foreign policy.
The concept of ‘Neighbourhood First’ emerged in 2008[2] but received a push only in 2014, under Modi. The policy aims to foster strong and friendly relations with neighbours on a consultative, outcome-oriented, and non-reciprocal basis.[3] The policy focuses on infrastructure improvement, development cooperation, and enhancing physical, digital, economic, trade, and people-to-people connectivity with neighbours.[4]
The Neighbourhood First policy has re-prioritised the South Asian neighbourhood in India’s strategic and security calculus.[5] To be sure, India has always maintained a strong presence in South Asia for security, strategy, and status reasons. Alongside sharing borders, India and its neighbours are bound by ethnic, historical, and civilisational ties. As a result, it fears spillover impacts and security repercussions from any potential instability or the presence of external powers. It also continues to push back against other powers in the region and maintains it as a sphere of influence. Furthermore, it wants its neighbourhood to help with its economic ambitions, ensure its security goal, and strengthen its position as a global power.
Nonetheless, the neighbourhood has undergone shifts since the beginning of the millennium; as have India’s foreign policy priorities. By the end of the decade, the democratic transition in Bhutan, political instability in Nepal, Maldives, and Bangladesh, and civil war in Sri Lanka had posed dilemmas and new challenges to India. The United Progressive Alliance (UPA) government in India, which was subject to various internal and coalition pressures, offered an opportunity for an emerging China to make inroads in these countries through economic assistance and investments. Most of these projects were later institutionalised and categorised under Beijing’s flagship Belt and Road Initiative.
It was against this backdrop that the newly elected BJP government, with a majority in the parliament, attempted in 2014 to give utmost importance to its neighbourhood. Through Modi’s ‘Neighbourhood First’ policy, India has increased its outreach in terms of humanitarian assistance and disaster response, security cooperation, political engagements, investments, and development assistance and grown more sensitive to the interests of these countries.
The policy has also made room for consistent learning. India has doubled down on cooperation with friendly regimes, leaders, and parties to enhance cooperation and collaboration and further its security interests and geopolitical ambitions. However, it has also learned that even friendlier regimes cannot keep China out nor secure India’s interests permanently, given China’s influence and economic heft. India has in turn increased pragmatic engagements with non-friendly regimes, offering them economic incentives with the hope that they would respect India’s redlines and interests.[6]
The policy balances coercion and inducement, although the former have become more subtle in the years since the policy was initiated. While earlier coercion measures included alleged blockades in Nepal and military posturing against the Maldives, the focus has now shifted mainly towards granting and denying access to Indian markets and assistance.[7] There is a growing understanding that the use of coercive measures and becoming involved in neighbours’ domestic politics would only drive these countries away from India and closer to the alternative—i.e., China.
A primary toolkit in the policy is to create interdependencies and economic leverages with its neighbours through connectivity and economic linkages. India believes that interdependencies will counter Chinese influence, strengthen its security, and further its interests. India has initiated, for example, over 100 projects with Nepal, Bangladesh, Sri Lanka, and Myanmar on road, rail, air, and maritime port connectivity. It has offered grants, financial assistance, and credit lines ranging from 1.5 to 1.75 percent to help neighbours with their development ambitions. By 2015, India had offered credit lines worth US$2.8 billion to Bangladesh, 1.3 billion to Nepal, 1.7 billion to Sri Lanka, and 80 million to the Maldives. By 2023, the worth of these lines had increased to US$7.9 billion to Bangladesh, 1.6 billion to Nepal, 2.7 billion to Sri Lanka, and 1.4 billion to the Maldives.[8]
Either bilaterally or in coordination with other like-minded countries like the United States, Japan, and Australia, India is offering more feasible and reliable assistance to South Asian countries. This is excluding budget assistance, private investments, and aid offered by India. For instance, since the 2022 economic crisis in Sri Lanka, India has provided the country assistance of US$4 billion. To the Maldives, India offered assistance worth US$850 million in 2024 alone. To Bhutan, India has offered assistance of INR 100 billion to help with economic recovery and its five-year plan.[9]
These initiatives have supplemented the development goals of India and its neighbours and helped developing South Asian countries that are facing economic challenges. These countries have also begun to exercise their agency to choose between China and India depending on what is in their best interests. They have realised that geography cannot be neglected and have continued to bet on India for connectivity, although they have not forgotten China’s capacities to invest and deliver.
Meanwhile, India’s trust deficit and suspicion towards China has only increased in the last decade. China’s economic assistance, defence cooperation, and surveillance vessels in South Asian countries are still a concern for India. Chinese control over Hambantota port, the Doklam clashes, and the Galwan clashes have further widened this trust gap. This has compelled India to continue with the robustness of its Neighbourhood First policy and maintain South Asia as a sphere of influence.
As the Neighbourhood First policy completes a decade, this report explores the perceptions of India’s neighbours. It highlights insights and perspectives from South Asian scholars, often missed when discussing the policy’s efficiency and effectiveness. Collating five articles by scholars from Nepal (Apeksya Shah), Maldives (Eva Abdulla), Bangladesh (Umme Salma Tarin), Sri Lanka (George I. H. Cooke), and Bhutan (Padam Kumar Rasaily), the report will highlight the successes and failures of India’s policy over the last decade. The report excludes Afghanistan, as India’s assistance and priorities in the country have changed since the Taliban takeover in 2021. Similarly, Pakistan is not discussed in this report, considering its hostile relations with India.
The report highlights some shared successes in India’s neighbourhood policy. First, there is an increase in the frequency and intensity of high-level political engagements; for instance, Modi was the first leader in almost two decades to visit Nepal and Sri Lanka. Second, there has been a notable push for connectivity and trade, especially through energy grids and pipelines, new checkposts, transit facilities, roadways, railways, and inland waterways. These areas of cooperation have seen a boost, especially with Bangladesh, Bhutan, and Nepal, albeit amid persistent concerns of trade deficit. Third, India’s aid and development assistance—ranging from ambulance services and community development projects to mega-infrastructure projects—is perceived as a success in the region, especially by countries like Sri Lanka, Bhutan, and Maldives. India and Bhutan are also exploring new avenues of cooperation, making sure that the relationship benefits future generations. Fourth, in Sri Lanka and the Maldives, India’s role as a first responder, its diplomatic patience in dealing with different regimes, and immunising relations to domestic pressures is seen as successes.
The report also highlights crucial challenges and missed opportunities in India’s policy. First, India has not been able to counter its negative perceptions as it is still viewed as an interventionist power. Certain policies like the 2015 blockade in Nepal, politicising of the Kachchatheevu issue, and indiscrete support to friendly regimes in Maldives and Bangladesh have worsened this perception. Second, India’s security-oriented outlook for the region, including offering alternatives to China and pushing back against China through diplomatic means, has continued to foster suspicion towards India’s intentions. Third, neighbouring countries continue to view the slow implementation of Indian projects as a challenge. (In contrast to how China is perceived as a more efficient partner.) In some cases, these delays have created new environmental and financial complexities, such as increasing costs of projects and growing debts. Fourth, India’s inability to resolve irritants (apart from the Land Boundary Agreement and the maritime boundary dispute with Bangladesh), such as sharing water with neighbours, Suvidha taxes with Bhutan, illegal fishing in Sri Lankan waters, and the Kalapani dispute with Nepal, underscores major misses.
This report makes the argument that despite an increase in development assistance, high-level political engagements, and push for connectivity, India has yet to address critical irritants and foster a positive image among its neighbours. By highlighting these perspectives, the report offers valuable insights to policymakers to make ‘Neighbourhood First’ more efficient and effective in the days to come.
Endnotes
[1] “Narendra Modi to take oath as PM of June 9, time of swearing in revealed,” Hindustan Times, June 7, 2024.
[2] Committee on External Affairs, Action Taken by the Government on the Observations/ Recommendations contained in the Twenty Second Report of the Committee on External Affairs on the subject ‘India’s Neighbourhood First Policy (New Delhi: Committee on External Affairs, 2024),
[3] “Action Taken by the Government on the Observations/ Recommendations contained in the Twenty Second Report of the Committee on External Affairs on the subject ‘India’s Neighbourhood First Policy”
[4] Ministry of External Affairs, “Annexure – A".
[5] Harsh V. Pant and Kalpit A. Mankikar, “Rising to the China Challenge: Sino-Indian Ties Under Modi,” Observer Research Foundation, April 30, 2024.
[6] Aditya Gowdara Shivamurthy, “Debating Partisanship in India’s Neighbourhood First Policy,” Observer Research Foundation, October 18, 2024.
[7] Prashant Jha, “The Modi-Doval-Jaishankar playbook for Neighbourhood,” Hindustan Times, January 9, 2024.
[8] Shivamurthy, “Debating Partisanship in India’s Neighbourhood First Policy.”
[9] Harsh V Pant, “The World in 2024: An Epilogue,” Observer Research Foundation, December 2024.
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