South Asia is witnessing a gradual transformation in regional dynamics, as India’s longstanding primacy faces increasing challenges from emerging alternatives, according to analysis by policy expert Syed Munir Khasru. The evolving landscape reflects a shift in smaller states’ capacities to diversify their partnerships, indicating that geographic advantage alone no longer guarantees regional leadership.
A significant factor in this changing balance is the ongoing strategic rivalry between India and China. Despite cautious normalization following their 1962 war and the deadly 2020 clash in the Gallwan Valley, tensions persist along their approximately 3,500-kilometer disputed border. Economic ties complicate this rivalry; India imported nearly US$132 billion worth of Chinese goods in the year ending March 2026, the largest share from any country. Indian authorities are reportedly seeking to reduce this dependency by identifying over US$550 billion of critical imports for potential domestic substitution.
China’s regional influence is most visible in Pakistan, its closest strategic partner in South Asia. Between 2020 and 2024, China accounted for 81% of Pakistan’s major arms imports, underpinning a US$5 billion defense program which recently saw the commissioning of the first Hangor-class submarine. Pakistan further deepened ties by issuing its first yuan-denominated sovereign bond worth 1.75 billion yuan (approx. HK$2.3 billion).
In Bangladesh, India’s close relationship with former Prime Minister Sheikh Hasina bolstered bilateral cooperation until her government was ousted in 2024 amid a popular uprising and subsequent banning of the Awami League. Hasina’s continued residence in New Delhi has strained relations, while her successor, Prime Minister Tancrue Rahman, signaled a strategic pivot by choosing China as the destination for his first overseas visit, meeting President Xi Jinping to pursue greater investment and cooperation. Observers note that this indicates Bangladesh’s readiness to balance ties between its two powerful neighbors.
Nepal highlights the risks for India when bilateral ties hinge on particular political figures. Following protests over Nepal’s 2015 constitution, which led to border disruptions and shortages within Nepal, China stepped in with emergency fuel supplies and agreements granting Nepal access to multiple seaports, breaking India’s historic trade monopoly. Similarly, Sri Lanka exemplifies how countries leverage competition between India and China for economic benefits. China has invested heavily in projects like the US$1.4 billion Colombo Port City and a US$3.7 billion oil refinery near Hambantota port, while India provided approximately US$4 billion in aid during Sri Lanka’s 2022 economic crisis and advanced its own infrastructure initiatives.
The Maldives has also adopted a balancing strategy. After President Mohamed Muizzcu rose to power on an "India Out" platform and sought to limit India’s military presence, the country expanded ties with China, which holds approximately US$1.37 billion in Maldivian debt. Nevertheless, India later intervened to help prevent a debt default and extended a US$65 million credit line, illustrating the continued contest for influence in the region.
The United States’ role in reinforcing India’s regional position has been inconsistent, with policy increasingly described as transactional. Trade tensions escalated last year when tariffs as high as 50% were imposed on Indian goods related to its Russian oil imports, while Pakistan saw tariffs lowered. Although an interim agreement lowered some tariffs, a new 10% levy was announced recently, further straining ties. Efforts to mend the relationship included a recent visit to India by US Secretary of State Marco Rubio, who met Indian officials to reaffirm cooperation amid growing US engagement with Pakistan. The US-Pakistan relationship also deepened, with Foreign Minister Ishar Daq and Rubio discussing counterterrorism collaboration, while Pakistan positioned itself as a key interlocutor in US-Iran negotiations.
These developments contribute to India’s strategic caution, informed by historical memories of times when the US and China aligned with Pakistan, such as during the 1971 war and the 1972 US opening to Beijing brokered with Pakistan’s help. Today, India faces a South Asia where its role is no longer one of uncontested dominance but part of a more complex, multipolar environment.
According to Professor Syed Munir Khasru, chairman of The Institute for Policy, Advocacy and Governance (IPAG), the challenge for India is not to revert to past hierarchies but to engage more flexibly and attentively with its neighbors’ economic and strategic priorities, moving beyond dependence on individual governments to broader public sentiment.