CWA # 2060

The World This Quarter 

India and the Neighbourhood (Jan-Mar 2026)

Continuity, Caution and Calculated assertiveness

During the first quarter, there was continuity and recalibration in India's approach towards its neighbourhood, characterised by diplomatic outreach, crisis management, economic engagement, and strategic signalling

Nanda Kishor M S 5 April 2026

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During the first quarter of 2026, continuity in New Delhi’s neighbourhood policy: India is no longer a passive balancer in South Asia but an active shaper of regional outcomes. Between January and March 2026, there was continuity and recalibration, characterized by diplomatic outreach, crisis management, economic engagement, and strategic signalling. There are at least seven significant developments, each of which provides insight into the changing grammar of India’s neighbourhood policy. All these developments underline India's readiness to shape its neighbourhood.

1. Bangladesh: Strategic patience and Managing political transition
Political upheaval in Bangladesh remained on the radar of the eastern neighbourhood in India. After the political uncertainties initiated in 2025, New Delhi played a restrained game, juggling both its security interests and an apparent reluctance to make an outright political choice. Stability was India's major concern. Close supervision was needed in border areas, especially in West Bengal and the Northeast, due to the risks posed by refugees and cross-border migration. Meanwhile, India maintained a low-profile presence in Dhaka for all stakeholders, and bilateral mechanisms in trade, connectivity, and security did not falter. The most interesting fact is the shift in India's approach from a more personality-based diplomacy to an institution-based one. This is an advancement of its neighbourhood policy. Instead of being perceived as supporting a specific political actor, India is establishing itself as a long-term ally of the Bangladeshi state. This policy can reduce short-term power but maximize long-term legitimacy.

2. Sri Lanka: Riding strategic benefits 
The first quarter of 2026 in Sri Lanka saw India fill the strategic space it had acquired during the economic crisis of the past years in Colombo. As the Sri Lankan economy stabilized, India shifted from crisis support to an economic partnership. The energy sector's connectivity became a major pillar. The development of renewable energy initiatives and grid connectivity strengthened India as a strong collaborator in Sri Lanka's economic revival. Meanwhile, India kept a close watch on China's re-entry into infrastructure financing in the island. Notably, India's participation has been made more stratified. In addition to government-to-government relationships, there was an apparent trend toward the privatization of work and people-oriented projects. It is an acknowledgement that strategic or security considerations cannot be the only determinant of long-term influence in Sri Lanka, but must be instilled in the daily economic activity.

3. Maldives: Strategic sensitivity amidst political volatility
The Maldives situation has remained a challenge to India's diplomatic tact. The rhetoric of the “India Out” campaign, which has been active in recent years, has not yet fully ended, but the first quarter of 2026 suggested a partial re-evaluation of the strategy in Malé. India has reacted with restraint and perseverance. Infrastructure and capacity-building development projects have also not stopped. Simultaneously, India has not been sucked into internal political struggles. The major insight here is the growing comfort India has with political turmoil in its immediate surroundings. Instead of responding violently to each change, New Delhi seems ready to endure short-term turbulence to protect long-term interests. This is a greater confidence in strategy.

4. Nepal: Silent Advances 
The situation with relations with Nepal in early 2026 is characterized by a comparatively low level of political temperature and important functional development. There is also cross-border energy trade, in which Nepal sells surplus hydropower to India. It is a silent yet revolutionary change. Projects related to connectivity that were previously delayed are now being executed more regularly. Railroad connections, inbuilt checkpoints, and online connectivity projects are slowly transforming the India-Nepal border. The interesting point is that there are no significant political scandals. India appears to have learned the lesson that open political intervention in Nepal tends to come back to haunt it. The existing policy focuses on economic interdependence as the prerequisite of stable relations.

5. Pakistan: Chronic hostility with controlled escalation.
Relations with Pakistan remain structurally hostile, and the first quarter of 2026 did not change that. Yet, a certain trend of restrained escalation can be observed. The ceasefire agreements across the Line of Control have mostly prevailed despite occasional occurrences. India has pursued a policy of tactical hardness that prevents situations from escalating into larger crises. Diplomatically, it has not been thawing out much. However, even the fact that there have never been any major escalatory crises is important. It implies that both parties are operating under an unwritten rule of restraint, without direct communication. The Pakistan policy of India seems to be in a strategy-rest phase, focusing on deterrence, domestic consolidation, and positioning in the international arena, but not on active participation.

6. China in the Neighbourhood: Competitive Coexistence
The role of China in evaluating India's neighbourhood cannot be overlooked. The first quarter of 2026 has once again underscored that the South Asian region is a battlefield for peaceful coexistence between China and India. The economic influence of China continues to spread across the region, especially in infrastructure and financing. Nonetheless, there is a slight change. Most South Asian states have become wary of their relationship with China and are trying to strike a balance between Chinese investments and their ties with India. India's response has not been confrontational. Rather, it is providing plausible substitutes in connectivity, energy and capacity building. It is focused on trustworthiness and openness, and not just size. This is a shift from reactive competition to proactive competition. India is not trying to match China project to project; instead, it is concentrating on areas where it has comparative advantages.

7. Continuing search for new regional frameworks 
It was the same case in the first quarter of 2026, with the ongoing stagnation of the traditional regional institutions such as SAARC. India, in turn, is investing more in sub-regional and issue-based structures. Efforts to use BIMSTEC and trilateral or quadrilateral groupings are on the increase. These adaptable plans enable India to avoid political snarls and concentrate on working together. This indicates a reconsideration of regionalism. India is following a networked strategy rather than formal institutions, forming overlapping systems capable of producing results.

To conclude: India and its neighbourhood in Jan-Mar 2026
Combined, the events of January to March 2026 indicate that India's neighbourhood policy is entering a new stage. The previous focus on the concept of Neighbourhood First is shifting to a more aggressive, active approach that can be termed Neighbourhood Shaping. This does not mean power in a conventional way. Instead, it is a demonstration of readiness to invest in resources, take calculated risks and maintain long-term interaction in various fields. It can be distinguished by three qualities. First, it is a definite turn towards economic statecraft, connectivity and energy cooperation in the centre. Second, India is being more strategic in patient, especially in the politically volatile places. Third, there is an increased awareness that power in the neighbourhood has to be gained through consistency and credibility rather than enforced by proximity.

The competition is daunting. India's approach will continue to be tested by political instability, external interventions, and structural asymmetries. However, as the first quarter of 2026 suggests, India is now better positioned than it was to overcome these complexities. The neighbourhood is, in most respects, the most challenging area of India's foreign policy. But it is also the arena against which the aspirations of India as a regional and global power are directly challenged. The following months will show whether the tendencies observed in the first part of 2026 can be sustained, and whether India will be able to transform tactical achievements into a stable, persistent regional order.

About the author

Dr Nanda Kishor MS is Head and Associate Professor at the Department of Politics and International Studies.