India's Neighbourhood First Policy — SAARC, BIMSTEC & Sub-Regional Cooperation

Neighbourhood First — India's Strategic Imperative

India shares land or maritime boundaries with eight countries. How New Delhi manages these relationships determines its ability to project power beyond the subcontinent, protect its internal security, and realise its ambitions as a leading power. Neglecting the neighbourhood creates vacuums that strategic rivals — above all China — are quick to fill.

The Neighbourhood First Policy (NFP) was adopted by Prime Minister Narendra Modi at the very outset of his first term. Its symbolic launch came on 26 May 2014, when Modi invited the heads of all eight SAARC member-states to his swearing-in ceremony — an unprecedented gesture that signalled a deliberate shift in India's diplomatic priorities.

Three core objectives of NFP:

Five operational pillars: enhanced physical connectivity; economic integration and trade; people-to-people contacts; security cooperation; and multilateral institutional engagement through SAARC and BIMSTEC.

SAARC — Structure, Summits and Paralysis

Key Facts

Summit History

SAARC holds summits at the level of Heads of State or Government. The 18th SAARC Summit was held in Kathmandu, Nepal on 26–27 November 2014 — and remains the last summit held to date (as of 2026). The 19th Summit was scheduled in Islamabad in November 2016 but was indefinitely postponed after India and several other members withdrew following the Uri terrorist attack.

Why SAARC Is Paralysed

SAARC's charter requires consensus for all decisions — giving any single member an effective veto. Pakistan's state-sponsorship of cross-border terrorism, and the resulting breakdown in India-Pakistan relations, have made progress impossible. India has consistently maintained that meaningful regional cooperation cannot proceed in an atmosphere of cross-border violence.

SAARC's intra-regional trade is under 5% of members' total trade — one of the lowest figures for any regional grouping — compared with over 25% for ASEAN and over 60% for the EU.

BIMSTEC — India's Preferred Regional Architecture

With SAARC stalled, India has actively promoted BIMSTEC as its preferred sub-regional platform. BIMSTEC excludes Pakistan and includes Thailand — spanning both South and Southeast Asia.

Key Facts

BIMSTEC Charter (2022/2024)

The Charter, adopted at the 5th BIMSTEC Summit held virtually in Colombo on 30 March 2022, gave the organisation a formal legal personality. It entered into force on 20 May 2024 after ratification by all seven members including Nepal (the last to ratify). The Charter consolidates BIMSTEC's institutional framework, streamlines the secretariat, and formally reduces the cooperation sectors.

Sectors of Cooperation (Restructured 2022)

At the Colombo Summit, BIMSTEC reduced its thematic pillars from 14 unwieldy sectors to 7 priority areas, each led by one member:

India leads three of the most strategically significant sectors, reflecting its centrality to BIMSTEC's functioning.

India-Bangladesh

Historical foundation: Bangladesh was born in 1971 with direct Indian military intervention against Pakistan — the Liberation War remains the bedrock of the bilateral relationship.

Sheikh Hasina era (2009–2024): Prime Minister Sheikh Hasina presided over the strongest phase of India-Bangladesh ties. Land Boundary Agreement (2015) resolved the decades-old enclave problem; connectivity through rail and road was deepened; power and energy trade expanded significantly.

Political change — August 2024: In a student-led mass uprising, Sheikh Hasina resigned on 5 August 2024 and fled to India. Nobel laureate Muhammad Yunus was sworn in as Chief Adviser of the interim government on 8 August 2024. The new government has sought a recalibration away from what critics had called an "India-centric" foreign policy.

Teesta water sharing: A draft agreement on sharing the Teesta river waters has been ready since 2011 but remains unsigned, blocked by West Bengal's opposition at the domestic level. The Teesta is crucial for Bangladesh's agriculture in the north-west. The Yunus government has signalled its intent to revive negotiations.

Connectivity: The Agartala–Akhaura rail link, renewed BIMSTEC engagement, and Mongla/Chittagong port access agreements are key connectivity anchors for India's North-East.

India-Nepal

Special relationship: India and Nepal share an open, Treaty of Peace and Friendship (1950)-governed border. Millions of Nepali citizens work in India; both armies share an exceptional institutional bond.

Kalapani border dispute: In May 2020, India inaugurated a road connecting Dharchula in Uttarakhand to the Lipulekh Pass. Nepal immediately protested, claiming the road passes through Nepali territory. On 20 May 2020, Nepal's parliament approved a new political map incorporating Kalapani, Lipulekh, and Limpiyadhura as Nepali territory. The dispute roots in differing interpretations of the 1816 Treaty of Sugauli regarding the true source of the Mahakali River.

Mahakali Treaty (1996): A landmark water-sharing treaty on the Mahakali river (Sharada/Mahakali); implementation remains incomplete.

BBIN MVA: The BBIN Motor Vehicles Agreement was signed on 15 June 2015 in Thimphu. Bangladesh, India, and Nepal have ratified it. Bhutan's upper house rejected ratification in November 2016 owing to domestic environmental concerns, though in March 2024 Bhutan signalled willingness to re-engage.

Hydropower: Nepal has vast hydropower potential (~83,000 MW). India imports Nepali hydro power and is a major investor in projects like Upper Karnali and Arun-III.

India-Sri Lanka

Historical backdrop: The ethnic Tamil issue — involving the rights of Sri Lankan Tamils (including the Indian-origin Tamil community) — has been a persistent sensitivity in bilateral ties. India's intervention via the Indian Peace Keeping Force (IPKF) in the 1987–1990 period left complex legacies.

Economic crisis 2022: Sri Lanka suffered a catastrophic sovereign default in 2022 — its worst economic crisis since independence — triggered by forex reserve depletion, fuel shortages, and food insecurity. India responded swiftly: approximately USD 4 billion was extended through lines of credit for petroleum, food, and medicines. This was India's largest-ever economic assistance package to a neighbour.

Hambantota Port: China's growing influence in Sri Lanka, symbolised by the Hambantota Port (handed to China Merchants Port on a 99-year lease in 2017 after Sri Lanka struggled with Chinese loan repayments), remains a strategic concern for India.

Fishermen's dispute: Tamil Nadu fishermen regularly stray into Sri Lankan territorial waters; arrests by Sri Lanka's navy are a recurring bilateral irritant.

India-Bhutan

Special friendship: India and Bhutan share a uniquely close partnership. Their 1949 Treaty of Friendship was renegotiated in 2007 — the new treaty replaced a provision requiring Bhutan to seek India's guidance on foreign policy with a broader sovereignty clause, while maintaining close consultations on security and defence matters.

Economic integration: India is Bhutan's largest trading partner and primary source of development aid. The hydropower partnership is central: India imports Bhutanese hydro power, financed through Indian project grants and loans.

Bhutan-China border talks: China and Bhutan have no diplomatic relations but have held over 24 rounds of boundary negotiations since 1984. The unresolved boundary — particularly around Doklam — has direct implications for India. The 2017 Doklam standoff arose when Chinese forces began building a road in territory claimed by Bhutan that India views as strategically vital to protect the Siliguri Corridor ("Chicken's Neck"). Any Bhutan-China settlement that concedes strategic heights without India's awareness would fundamentally alter the security calculus.

India-Maldives

Historically close: India has been the traditional security provider and first responder for the Maldives — from foiling the 1988 coup attempt (Operation Cactus) to providing disaster relief post-2004 tsunami.

"India Out" campaign and Muizzu: Mohamed Muizzu, running on an explicit "India Out" platform, won the Maldivian presidential election in September 2023. He requested India to withdraw approximately 89 military personnel managing two Indian helicopters and a Dornier aircraft gifted to the Maldives.

Troops withdrawal 2024: India agreed to complete the troop withdrawal by 10 May 2024. Muizzu made his first state visit to China in January 2024 (within days of taking office), signing several cooperation agreements. India responded by temporarily restricting direct flights from mainland Indian tourists, and Lakshadweep was promoted as an alternative tourism destination.

China factor: China's strategic interest in the Maldives as a potential Indian Ocean node is well-documented; Muizzu's pivot towards Beijing is a direct expression of the "String of Pearls" dynamic.

India-Myanmar

2021 coup: Myanmar's military (Tatmadaw) seized power on 1 February 2021, detaining elected leader Aung San Suu Kyi. The subsequent civil war has destabilised Myanmar's border regions adjoining India's northeastern states (Manipur, Mizoram, Nagaland, Arunachal Pradesh).

Free Movement Regime (FMR): The FMR, in place since 1968, allowed residents within 16 km of the India-Myanmar border to cross without a visa — recognising that colonial-era borders split ethnic communities. India suspended the FMR in February 2024, citing cross-border infiltration of armed groups and drug trafficking. Plans to fence the entire 1,643-km border are underway.

Caladan Multimodal Project and connectivity: India's connectivity projects through Myanmar (to Sittwe port and onward) face uncertainty because of the civil war and the junta's loss of territorial control.

India-Afghanistan

Strategic assets: India invested over USD 3 billion in Afghan infrastructure — including the Salma Dam, the Afghan Parliament building in Kabul, and the Zaranj–Delaram highway — under the elected Afghan governments.

Taliban takeover — August 2021: India evacuated its diplomatic personnel following the Taliban's return to power in August 2021 and initially maintained only a "technical team" in Kabul. By October 2025, India reopened its full embassy in Kabul, signalling pragmatic engagement with Taliban 2.0 as Pakistan's influence with the Taliban diminished.

Chabahar — alternative route: Since the land route through Pakistan is blocked, India uses Iran's Chabahar Port linked to the Zaranj–Delaram Highway as an alternative trade corridor to reach Afghanistan and Central Asia, bypassing Pakistan entirely.

Sub-Regional Groupings

Challenges: Trust Deficit and China's Expanding Footprint

String of Pearls: China's strategy of developing strategic port infrastructure across the Indian Ocean littoral — Gwadar (Pakistan), Hambantota (Sri Lanka), Kyaukpyu (Myanmar), Chittagong (Bangladesh), and growing interest in the Maldives — creates potential military-use nodes encircling India.

China's BRI in the neighbourhood: Almost all of India's neighbours have signed on to China's Belt and Road Initiative (BRI). India remains the only major regional power to formally reject BRI, citing sovereignty concerns over the China-Pakistan Economic Corridor (CPEC) passing through Pakistan-Occupied Kashmir.

Trust deficit drivers:

• Water disputes (Teesta, Mahakali, Feni) unresolved for decades
• Kalapani boundary dispute with Nepal straining an otherwise close relationship
• Perception of India as a "big brother" interfering in smaller neighbours' politics
• India's sometimes slow or reactive diplomacy compared with China's proactive chequebook diplomacy

Way Forward

1. Revive SAARC selectively — pursue functional SAARC cooperation on non-contentious issues (disaster management, health) while maintaining the political boycott of Pakistan-hosted summits
2. Deepen BIMSTEC — operationalise the 2024 Charter; push for a BIMSTEC Free Trade Agreement and the BIMSTEC Grid Interconnection
3. Settle water disputes — sign the Teesta accord with Bangladesh; implement the Mahakali Treaty with Nepal
4. Resolve Kalapani diplomatically — re-engage Nepal through joint technical committees; avoid unilateral road-building provocations
5. Connectivity as diplomacy — accelerate BBIN MVA, Agartala–Akhaura rail, Raxaul–Kathmandu railway, and Chabahar-linked corridors
6. Development finance — scale up the Indian Development and Economic Assistance Scheme (IDEAS) to compete with Chinese BRI offers
7. People-to-people ties — expand ITEC (Indian Technical and Economic Cooperation) training scholarships; liberalise visa regimes for students and professionals

Quick-Reference Tables

SAARC Members

BIMSTEC Members

Key Bilateral Facts — Exam Ready

Recent Developments (2024–2026)

Bangladesh Political Transition and India's Neighbourhood Dilemma (2024–2025)

Sheikh Hasina, Bangladesh's Prime Minister and India's most trusted neighbourhood partner, resigned on 5 August 2024 and fled to India following weeks of student-led protests against her government. Nobel laureate Muhammad Yunus was appointed Chief Adviser of an interim government on 8 August 2024. The transition immediately strained India-Bangladesh ties, which had been the showpiece of the Neighbourhood First policy — characterised by large infrastructure investments, power exports, connectivity projects, and strong security cooperation.

Key friction points under the Yunus government include: Hasina's continued presence in India (Bangladesh has demanded extradition; India has not complied); attacks on Hindu minorities in Bangladesh; and Yunus's March 2025 visit to China, where he described India's northeastern states as "landlocked" and Bangladesh as "the only guardian of the ocean" that could serve as an extension of the Chinese economy. India formally protested these remarks. The India-Bangladesh relationship, once a Neighbourhood First success story, has entered its most difficult phase since the 1975 Bangladesh coup.

UPSC angle: A critical case study for the Neighbourhood First policy's vulnerabilities. India must balance strategic interests (anti-insurgency cooperation, connectivity) with the challenge of engaging a post-Hasina government that is leaning towards China. Mains-worthy for GS-II analysis on India's soft power limits.

India-Maldives Reset — From "India Out" to Strategic Partnership (2024–2025)

Maldivian President Mohamed Muizzu, elected in November 2023 on an "India Out" platform, underwent a significant foreign policy recalibration in 2024. Facing a severe economic crisis, Muizzu attended PM Modi's swearing-in ceremony in June 2024 and made a state visit to India in October 2024, where both sides signed a comprehensive Vision Document for bilateral cooperation. India rolled over a USD 50 million treasury bill due in May 2024 and signed bilateral currency swap agreements amounting to USD 760 million.

India withdrew its 89 military personnel from the Maldives by May 2024 (replaced by civilian operators of the gifted aircraft), addressing Muizzu's core demand, which paved the way for normalisation.

UPSC angle: The Maldives episode illustrates both the vulnerability of India's neighbourhood partnerships to domestic electoral politics, and the economic leverage India retains as the Maldives' largest development partner. Economic statecraft as a diplomatic tool.

PM Modi's Maldives State Visit — India's 60th Independence Day Honour (July 2025)

PM Modi made his first-ever state visit to the Maldives on 25–26 July 2025, which coincided with the Maldives' 60th Independence Day (26 July). President Muizzu honoured Modi with the Maldives' highest state honour at the Independence Day celebrations — a significant symbolic gesture marking the bilateral reset.

Key outcomes of the July 2025 visit:

• India announced a USD 565 million Line of Credit to support Maldivian infrastructure development.
• Both sides agreed to reduce Maldives' annual debt repayment obligations to India by 40% — providing critical fiscal relief to the Maldives (which faced potential sovereign debt default on approximately USD 600 million in Sukuk bonds).
• India donated 72 vehicles and defence equipment, jointly inaugurated a new Ministry of Defence building in Malé, and handed over 3,300 social housing units in Hulhumalé.
• Six High Impact Community Development Projects were inaugurated across the Maldives.
• Both sides launched negotiations on a Free Trade Agreement.

The visit consolidated the turnaround from Muizzu's early "India Out" posture. Maldives' economic distress — the primary driver of recalibration — made India's development and financial assistance indispensable.

UPSC angle: Prelims — PM Modi's Maldives visit: July 25–26, 2025; 60th Independence Day honour; USD 565 million LoC; 40% debt repayment reduction; FTA negotiations launched. Mains — critically assess the India-Maldives relationship reset under President Muizzu; does India's economic leverage in smaller neighbours represent effective economic statecraft or dependency-building?

6th BIMSTEC Summit — Bangkok, April 2025

The 6th BIMSTEC Summit was held in Bangkok, Thailand in April 2025 (Thailand is a BIMSTEC member and hosted the summit). Key outcomes: progress on the BIMSTEC Free Trade Area framework; energy grid connectivity; digital cooperation; and disaster management. PM Modi used the summit as an opportunity for bilateral meetings — most significantly with Bangladesh's Muhammad Yunus (first bilateral since August 2024 transition) and other neighbourhood leaders.

India has consistently prioritised BIMSTEC over SAARC since 2014, given SAARC's effective paralysis (last summit: 2014, Kathmandu). The BIMSTEC Charter entering into force in May 2024 has given the organisation a stronger institutional foundation.

UPSC angle: Prelims — 6th BIMSTEC Summit: Bangkok, April 2025; BIMSTEC Charter: in force May 2024; 7 members (Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, Thailand). Mains — has BIMSTEC successfully filled the vacuum created by SAARC's paralysis? Assess India's regional connectivity strategy through BIMSTEC, Act East Policy, and the Neighbourhood First doctrine.

BIMSTEC Charter Enters Into Force — May 2024

The BIMSTEC Charter entered into force on 20 May 2024, giving the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation its first treaty-based legal foundation. BIMSTEC's 7 members (Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, Thailand) formally codified the organisation's structure, objectives, and decision-making process. This is significant as India sees BIMSTEC as the preferred alternative regional platform to the India-Pakistan-deadlocked SAARC.

UPSC angle: The BIMSTEC Charter entering into force in May 2024 is a high-probability Prelims fact. Note the distinction: SAARC has 8 members (includes Pakistan, Afghanistan); BIMSTEC has 7 members (excludes Pakistan and Afghanistan; includes Thailand).

India-Myanmar — Border Fencing and FMR Suspension (2024)

India suspended the Free Movement Regime (FMR) along the India-Myanmar border in February 2024, ending the decades-old arrangement that allowed residents within 16 km of the border to cross freely. India also announced plans to construct a fence along the 1,643 km border. The suspension was driven by the influx of refugees and militants fleeing the ongoing Myanmar civil war, and concerns about cross-border smuggling and the movement of insurgents from northeast India operating from Myanmar.

India's neighbourhood policy toward Myanmar has to balance humanitarian concerns (ongoing civil war, internally displaced persons) with security imperatives (preventing insurgent sanctuaries) and strategic interests (India-Myanmar-Thailand Trilateral Highway, Sittwe Port under Kaladan Multi-Modal project).

UPSC angle: FMR suspension (February 2024), border fencing, and India's dilemma between connectivity and security in the Myanmar context are important for both GS-II and GS-III (border management, internal security).

Key Terms

Neighbourhood First Policy

• Definition: India's foreign policy framework that prioritises relations with immediate neighbours (Pakistan, China, Bangladesh, Nepal, Sri Lanka, Bhutan, Maldives, Afghanistan) through enhanced connectivity, trade, and people-to-people ties.
• Origin: Articulated as a priority under PM Vajpayee; explicitly named and emphasised since 2014; operationalised through SAARC summits, Gujral Doctrine, and bilateral agreements.
• UPSC: Gujral Doctrine (1996) — non-reciprocity with smaller neighbours; Neighbourhood First vs Act East; distinction from SAARC (multilateral) vs bilateral ties; challenges: China's influence, CPEC.

SAARC (South Asian Association for Regional Cooperation)

• Definition: A regional intergovernmental organisation of eight South Asian nations (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka) established to promote economic cooperation, cultural development, and regional peace.
• Origin: Established Dhaka Charter signed 8 December 1985; headquartered in Kathmandu; last (18th) Summit held Kathmandu November 2014; 19th Summit (scheduled Islamabad, November 2016) cancelled after India boycotted following Uri attack; no summit held as of April 2026 — over a decade gap.
• UPSC: 8 members (Afghanistan activities suspended post-Taliban takeover); SAFTA (2006); effectively defunct — no summit in 10+ years; India prefers BIMSTEC; Bangladesh and Pakistan called for revival in 2025 but India remains cool given cross-border terrorism concerns.

BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation)

• Definition: A regional organisation of seven countries bordering the Bay of Bengal (Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal, Bhutan) focused on trade, investment, energy, connectivity, and counter-terrorism cooperation.
• Origin: Established 6 June 1997 as BIST-EC; Myanmar joined December 1997 → BIMST-EC; Nepal and Bhutan joined 2004 → final name BIMSTEC adopted; secretariat in Dhaka; 6th Summit held 4 April 2025, Bangkok (Thailand hosted); PM Modi attended; adopted Bangkok Vision 2030; chairmanship transferred to Bangladesh.
• UPSC: 7 members; India + 6 (no Pakistan); 6th Summit (Bangkok, April 2025) — key recent exam fact; Bangkok Vision 2030 is BIMSTEC's first-ever Vision Document; Maritime Transport Cooperation Agreement signed; BIMSTEC Games 2027 announced; relevance to Act East Policy.

Gujral Doctrine

• Definition: A foreign policy principle articulated by PM I.K. Gujral (1996) under which India would offer unilateral concessions to smaller neighbours without expecting reciprocity, premised on India's responsibility as the largest South Asian nation to build goodwill.
• Origin: Proposed by Gujral as External Affairs Minister (1996) and later as PM (1997–98); aimed at normalising relations with all SAARC neighbours simultaneously.
• UPSC: Five principles — non-interference, no group for bilateral interests, sovereign equality, peaceful dispute resolution, non-reciprocity; critiqued for being too generous; contrast with realist approach.

INSTC (International North-South Transport Corridor)

• Definition: A multi-modal transport network of ships, rail, and road routes connecting India to Russia and Europe via Iran, reducing cargo transit time from Mumbai to Moscow compared to the Suez Canal route.
• Origin: Agreement signed by India, Iran, Russia in 2000; operationalised gradually; expanded to 13 member states; gained strategic importance after Russia-Ukraine war.
• UPSC: India-Iran-Russia trilateral; reduces Mumbai-Moscow time from 40 days (Suez) to ~25 days; Chabahar Port is India's key node; contrast with China's BRI.