How India's Neighbourhood First Policy Works

India's Neighbourhood First policy — announced by Prime Minister Modi at his 2014 inauguration, which he chose to distinguish from his predecessors by inviting all SAARC leaders — is a doctrine stating that India's immediate South Asian neighbours will receive priority diplomatic attention, development assistance, and connectivity investment. 

The policy's operational rationale is that India's ability to project power globally is constrained by instability and mistrust in its own neighbourhood; a South Asia where neighbours see India as a collaborative partner rather than a hegemon serves India's long-term strategic interests better than a neighbourhood where India's size triggers resistance.

Representational Visualisation: How India's Neighbourhood First Policy Works

The policy's outcomes have been mixed across the region. Sri Lanka — rescued from a severe economic crisis partly through India's $4 billion emergency credit and debt restructuring support (2022) — emerged as a Neighbourhood First success story; the Wickremesinghe government's pragmatic engagement with India after 2022 stabilised the relationship. Nepal's relationship has been managed through connectivity investments (power trade, rail connectivity proposals, the Pancheshwar Dam project) alongside persistent concerns about Chinese infrastructure in Nepal that India views as strategic encirclement. Bangladesh under Sheikh Hasina (until July 2024) was a Neighbourhood First highlight — deep economic, security, and connectivity cooperation; her removal in July 2024 student protests and the interim Mohammad Yunus government's different orientation complicated the relationship. The Maldives under President Muizzu (elected October 2023) explicitly distanced from India — "India Out" campaign, requested withdrawal of Indian military personnel — testing Neighbourhood First's resilience.

What You Need to Know

• Modi's 2014 inauguration: all SAARC leaders invited — PM Nawaz Sharif (Pakistan), PM Sushil Koirala (Nepal), PM Mahinda Rajapaksa (Sri Lanka), PM Hasina (Bangladesh), President Mukherjee-Maumoon (Maldives), PM Thinley (Bhutan), President Hamid Karzai (Afghanistan); signal that India would prioritise neighbourhood engagement; the SAARC summit has not been held since 2014 — effectively deadlocked by India-Pakistan tensions.
• Sri Lanka crisis support (2022): India provided $4 billion in assistance during Sri Lanka's worst economic crisis (fuel credit lines, food credit lines, swap arrangement, HIPC debt relief support); alongside IMF programme; cemented India's role as Sri Lanka's most significant bilateral partner; India's response was faster and larger than China's despite Chinese debt's role in the crisis.
• Bangladesh post-Hasina (2024): PM Sheikh Hasina fled to India in July 2024 following student protests over quota system; Muhammad Yunus became interim head of government; India's relationship with the new Dhaka government has been more complex — Yunus government's review of India-signed connectivity and power agreements; Hindu minority attacks documented; relations cooler but functionally maintained.
• Nepal's balancing: Nepal is constitutionally secular and politically left-of-centre; Chinese investment in Nepal's infrastructure (airports, roads, Pokhara International Airport linked to BRI) creates India's concern about strategic encirclement; India maintains Nepal's most important bilateral trade and energy relationship; Indian frustration with Nepal's periodic China-tilts is managed through sustained economic and cultural engagement.
• Maldives challenge: President Muizzu's October 2023 election on "India Out" platform; requested withdrawal of ~90 Indian military personnel from the Maldives; India withdrew personnel by May 2024; subsequent normalisation as Maldives' economic dependence on India (tourism infrastructure, essential goods supply) created pragmatic compulsion; Modi and Muizzu met; the relationship stabilised after the initial friction.

How It Works in Practice

1. Development assistance as soft power: India's development assistance to neighbours — EXIM Bank lines of credit, grant projects, technical cooperation — is the most direct expression of Neighbourhood First. The Bangladesh-India Friendship Power Plant, the India-funded Sakteng Wildlife Sanctuary road (Bhutan), power grid interconnection with Nepal and Bangladesh, and the India-funded railway projects in Sri Lanka and Bangladesh represent the development partnership layer. These projects aim to create tangible stakes in the bilateral relationship for the recipient population.

2. Connectivity as strategic depth: India's connectivity initiatives in the neighbourhood — the BBIN (Bangladesh-Bhutan-India-Nepal) Motor Vehicles Agreement; the Kaladan Multimodal Transit Transport Project (connectivity to Myanmar); the BIMSTEC framework — serve both economic and strategic purposes: economic connectivity reduces trade barriers; strategic connectivity provides India alternative access routes to Northeast India and potential encirclement countermeasures against China's growing regional presence.

3. The Pakistan exception: Pakistan is formally a South Asian neighbour but effectively outside the Neighbourhood First framework in practice: India-Pakistan trade is minimal; the Kartarpur Corridor (allowing Sikh pilgrims to visit the Kartarpur Sahib Gurdwara in Pakistan) is the only active connectivity link; all SAARC summits have been boycotted by India after the 2016 Uri attack; Operation Sindoor (May 2025) represents the nadir of bilateral relations. The Neighbourhood First policy's success with other neighbours makes the Pakistan relationship's dysfunction more conspicuous.

4. China's countermeasures in India's neighbourhood: China's BRI (Belt and Road Initiative) infrastructure in Pakistan (CPEC — China-Pakistan Economic Corridor, $60 billion), Sri Lanka (Hambantota Port), Bangladesh (multiple power and infrastructure projects), Nepal (airport, rail), and Maldives represents a systematic Chinese effort to build strategic presence in India's neighbourhood. India views this as strategic encirclement; its Neighbourhood First policy is partly a counter-strategy — offering a democratic, development-oriented alternative to BRI — that has had partial success.

5. BIMSTEC as SAARC alternative: The Bangladesh-India-Myanmar-Sri Lanka-Thailand-Nepal-Bhutan (BIMSTEC) framework has become India's preferred multilateral vehicle for South and Southeast Asian engagement — partly because SAARC is paralysed by India-Pakistan tensions; Modi visited Thailand for the 2025 BIMSTEC Summit; BIMSTEC covers both South and Southeast Asia, bridging the Neighbourhood First and Act East policies.

What People Often Misunderstand

• Neighbourhood First is about India's interests, not purely altruism: India's development assistance to neighbours serves India's strategic interests — stable neighbours, reduced China influence, connectivity for Indian goods — as well as the neighbours' development needs; framing it as purely humanitarian misses the strategic logic.
• SAARC's death is India's choice as much as Pakistan's obstruction: India refused to attend the 2016 SAARC summit (scheduled for Islamabad) after the Uri attack, effectively killing the summit schedule; while Pakistan's support for terrorism is India's stated justification, India has also used SAARC non-participation as a political signal; BIMSTEC's rise is partly India choosing a different regional architecture.
• The Maldives' "India Out" episode has precedent: Several Indian Ocean island states (Maldives, Sri Lanka) have periodically played India and China against each other to maximise assistance and maintain autonomy; the Muizzu episode is not unique — Yameen's Maldives (2013–18) was also China-leaning; India's lesson has been to maintain engagement through economic dependence rather than security presence.
• Bangladesh's post-Hasina relationship has multiple dimensions: The India-Bangladesh relationship under Hasina was exceptionally close, partly because Hasina's political survival post-1971 depended on Indian support; the Yunus government's different orientation reflects Bangladesh's political centre of gravity, not necessarily a Bangladesh pivot to China.
• India's development assistance is constrained by its own economic resources: India's capacity to offer development assistance is real but limited — India itself is a middle-income developing country; it cannot compete with China's BRI lending capacity in purely financial terms; India's comparative advantages are proximity, language/cultural affinity, democracy, and capacity in governance reform.

What Changes Over Time

Pakistan's post-Operation Sindoor US-Saudi alignment and India's continued bilateral-only approach suggest that the India-Pakistan dimension of Neighbourhood First will remain paralysed for the foreseeable future. Sri Lanka's continued economic recovery — with India as primary partner — and Nepal's infrastructure connectivity completion will be the Neighbourhood First success stories of 2025–2028.

Sources and Further Reading

• Insightsonindia — Neighbourhood First and Act East: https://www.insightsonindia.com/2025/04/16/upsc-editorial-analysis-indias-strategic-convergence-of-neighbourhood-first-and-act-east-policies/
• IRGA — India's strategic autonomy: https://irga.in/world_desc.php?id=1217
• Springer — Evolution of India's Neighbourhood First Policy: https://link.springer.com/article/10.1007/s12115-023-00819-y

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