For decades, India’s smaller neighbours lived under the shadow of India’s size.
India was the largest economy, largest military power, largest market, largest democracy and most geographically central country in South Asia. It surrounded Nepal and Bhutan, shared its longest land border with Bangladesh, sat close to Sri Lanka and Maldives in the Indian Ocean, bordered Myanmar in the east, and remained locked in hostility with Pakistan in the west.
This geography gave India natural influence. But natural influence is not the same as permanent control.
Today, smaller neighbours are gaining bigger bargaining power against India. They are doing it through China, domestic nationalism, strategic location, debt negotiations, port access, connectivity choices, water disputes, migration politics and regime-change diplomacy. They know India needs them for security, trade, maritime access, Northeast connectivity, regional legitimacy and China management. That knowledge has changed the balance.
The new South Asian reality is not that India has become weak. India remains the dominant regional power. The new reality is that smaller neighbours have become more skilled at using India’s anxieties.
They no longer behave as passive recipients of Indian goodwill. They bargain, hedge, delay, diversify and extract concessions. Nepal plays the China card. Bangladesh uses geography and market relevance. Sri Lanka uses Indian Ocean location and creditor competition. Maldives uses maritime importance and sovereignty politics. Bhutan negotiates carefully with China while preserving Indian trust. Myanmar’s instability forces India into difficult engagement. Even smaller states now understand that in a competitive Asia, strategic location is power.
India’s Neighbourhood First policy formally aims to build mutually beneficial, people-oriented regional frameworks for stability and prosperity through physical, digital and people-to-people connectivity. That is the right vision. But India must now operate in a neighbourhood where small states are no longer content with symbolic closeness. They want leverage.
This is the age of small-state bargaining.
Why Small States Have More Power Than Before
Small states gain bargaining power when big powers compete.
During periods when India was the only serious external partner in South Asia, smaller neighbours had fewer options. They could complain about India, but they could not easily bypass India. Geography kept them tied to New Delhi.
That has changed.
China’s rise has transformed South Asian bargaining. Beijing offers infrastructure, loans, ports, roads, power projects, defence equipment, diplomatic support and political alternatives. Even when Chinese projects are slow or controversial, the mere possibility of Chinese involvement gives smaller neighbours negotiating space.
This does not mean every neighbour wants to become pro-China. Most do not. They understand the risks of debt, dependence and strategic exposure. But they also know that India becomes more attentive when China enters the conversation.
That is the essence of bargaining power.
A small neighbour does not need to defeat India. It only needs to convince India that ignoring it will be costly.
Geography Has Become a Negotiating Asset
India often sees geography as a source of its own advantage. But smaller neighbours also use geography as leverage.
Bangladesh controls India’s easiest land access to the Northeast. Nepal sits across India’s Himalayan security frontier. Bhutan lies near the Siliguri Corridor and the India-China-Bhutan trijunction. Sri Lanka sits near vital Indian Ocean shipping lanes. Maldives sits across sea lanes in the central Indian Ocean. Myanmar links India to Southeast Asia and affects security in the Northeast.
Each neighbour can therefore say, directly or indirectly: India needs us.
This is why small states can bargain above their economic size. A port, river, road corridor, border district or island chain can carry strategic value far beyond GDP. In geopolitics, location can be currency.
India’s neighbours have learnt to spend that currency.
Nepal: The China Card as Leverage
Nepal is the classic example of a small state using external balancing to gain room against India.
Nepal is deeply connected to India through the open border, trade, migration, religion, culture and employment. But Nepali politics has repeatedly used anti-India sentiment to assert sovereignty. Border disputes, treaty revision demands and complaints about Indian interference remain powerful domestic themes.
China gives Nepal an alternative language: connectivity, sovereignty, infrastructure and diversification. Nepal and China signed a Framework for Belt and Road Cooperation in December 2024, identifying connectivity priorities such as the Trans-Himalayan Multidimensional Connectivity Network, roads, tunnels, railways, aviation infrastructure, transmission lines and the China-Nepal Cross-Border Railway after feasibility studies.
For Nepal, this does not mean abandoning India. Geography makes that unrealistic. India remains Nepal’s most practical market and transit route. But China gives Kathmandu negotiating leverage. Nepal can use Chinese connectivity projects to pressure India for better roads, power trade, transit facilities and political respect.
The message is clear: India may be unavoidable, but it is no longer Nepal’s only option.
That is a major psychological shift.
Bangladesh: The Power of Being Indispensable
Bangladesh’s bargaining power comes from a different source: indispensability.
India needs Bangladesh for Northeast connectivity, border management, counter-insurgency cooperation, trade routes, Bay of Bengal strategy, river management and regional integration. Bangladesh knows this.
For years, India-Bangladesh ties were among New Delhi’s strongest neighbourhood success stories. But after Sheikh Hasina’s ouster in 2024, the relationship became more uncertain. Reuters reported in December 2024 that India and Bangladesh were trying to pursue constructive relations after months of tension following the political change in Dhaka.
China’s influence in Bangladesh also became more relevant after the political transition. Reuters reported in February 2026 that China’s influence in Bangladesh was likely to deepen after the election following Hasina’s ouster, while also noting that India remained too large a neighbour to be sidelined completely.
That sentence captures Bangladesh’s leverage perfectly.
Bangladesh cannot ignore India. But India also cannot ignore Bangladesh.
Dhaka can bargain on trade, transit, water, border issues and China-backed infrastructure because it knows India’s eastern strategy depends heavily on Bangladesh. The Teesta dispute, trade restrictions, migration debates and Chinese infrastructure possibilities all increase Bangladesh’s negotiating weight.
Bangladesh’s power lies in the fact that India’s Northeast cannot be fully integrated without it.
Sri Lanka: Crisis as Bargaining Space
Sri Lanka’s debt crisis showed a different form of small-state bargaining.
When a neighbour is economically stable, it bargains through trade and diplomacy. When it collapses, it bargains through urgency, creditor competition and strategic vulnerability.
Sri Lanka’s 2022 crisis forced India to act quickly. India provided close to USD 4 billion in financing support during the crisis, helping Sri Lanka manage essential imports and financial pressure. That assistance gave India goodwill, but it also showed how costly neighbourhood instability can be.
Sri Lanka’s leverage comes from its location in the Indian Ocean. It sits near major shipping routes and has ports that matter to India, China, Japan, the Gulf and Western powers. Hambantota, Colombo and Trincomalee are not ordinary infrastructure assets. They are strategic locations.
The crisis allowed Sri Lanka to engage multiple actors: India, China, Japan, the IMF, bondholders and other creditors. The IMF approved fresh funding for Sri Lanka in May 2026 under its ongoing programme, showing that Sri Lanka’s post-crisis recovery still depends on external financial management and creditor confidence.
For India, Sri Lanka’s bargaining power lies in the danger of vacuum. If India steps back, China can step in. If India delays, others can shape Colombo’s choices. If India overreaches, Sri Lankan nationalism can resist it.
Sri Lanka has learnt that its vulnerability can also be a form of leverage.
Maldives: Small Islands, Big Maritime Value
Maldives is geographically small but strategically powerful.
It sits across critical Indian Ocean sea lanes. Its maritime space matters for surveillance, logistics, tourism, security and China-India competition. That makes Maldives far more important than its population or land area would suggest.
Maldives has repeatedly used sovereignty politics to bargain with India. The “India Out” sentiment, the demand to reduce Indian military presence, and periodic engagement with China show how a small island state can use nationalism and external competition to extract attention.
India’s response has been to combine patience with financial support. In May 2025, India rolled over a USD 50 million treasury bill for Maldives for another year after a request from the Maldivian government. Reuters reported that Maldives faced heavy debt pressure, with public and publicly guaranteed debt at about USD 9.4 billion, or more than 134% of GDP, by the end of 2024.
That is precisely why Maldives can bargain.
India does not want Maldives to become financially desperate and strategically dependent on China. Maldives knows India has that concern. So even when relations become tense, Malé can expect India to remain engaged.
This is small-state diplomacy at its sharpest: create anxiety, then negotiate from necessity.
Bhutan: Quiet Bargaining Without Provocation
Bhutan’s case is different because it does not use loud anti-India politics. Its bargaining is quiet, careful and highly disciplined.
Bhutan remains India’s closest Himalayan partner. India is deeply involved in Bhutan’s development and hydropower economy. India committed INR/Nu 10,000 crore for Bhutan’s 13th Five-Year Plan period from 2024 to 2029.
But Bhutan also has its own sovereignty and strategic choices. Its unresolved boundary with China gives it a difficult bargaining position. Bhutan and China held the 25th round of boundary talks in Beijing in October 2023 and signed a cooperation agreement on the responsibilities and functions of a Joint Technical Team for boundary delimitation and demarcation.
For India, this matters because areas near Doklam and the India-Bhutan-China trijunction have direct security implications. Bhutan therefore holds a sensitive card. It does not need to threaten India. The mere fact of Bhutan-China negotiations gives Thimphu agency.
Bhutan’s bargaining style is not confrontational. It is sovereign caution. It preserves Indian trust while slowly managing China. That makes it one of the most sophisticated examples of small-state diplomacy in South Asia.
Myanmar: Instability as Compulsion
Myanmar is not a small neighbour in the same way as Maldives or Bhutan, but its fragmented politics gives it bargaining power of another kind.
India cannot ignore Myanmar because instability there affects Manipur, Mizoram, Nagaland and Arunachal Pradesh. Refugees, insurgent movement, narcotics, arms trafficking and border insecurity all affect India’s Northeast.
This creates a difficult compulsion. India may be uncomfortable with Myanmar’s military regime, but it still needs channels of communication for border security and regional connectivity. In June 2026, Associated Press reported that Prime Minister Narendra Modi met Myanmar’s military-backed President Min Aung Hlaing in New Delhi, with India saying engagement would continue because dialogue was more productive than isolation. The discussions included border security, intelligence cooperation, trade, cybercrime, human trafficking and economic collaboration.
Myanmar’s bargaining power does not come from strength. It comes from instability.
A collapsing neighbour can force India into engagement because the alternative may be worse. This is a hard lesson: weak states can also possess leverage when their disorder spills across borders.
The Tools Small Neighbours Use Against India
South Asian small-state bargaining now uses several tools.
The first tool is China. A neighbour does not need to fully align with China. It only needs to signal that China is available. That signal increases India’s urgency.
The second tool is domestic nationalism. Leaders in Nepal, Maldives, Bangladesh or Sri Lanka can criticise India to prove independence. Anti-India rhetoric often works domestically because India’s size creates suspicion.
The third tool is project competition. If India delays a road, port, power project or river-management plan, neighbours can seek alternatives from China, Japan, the Gulf or multilateral lenders.
The fourth tool is debt distress. Financially weak countries can use creditor competition to secure relief, loans, rollovers or investment.
The fifth tool is strategic geography. Ports, borders, rivers, mountain passes and sea lanes become bargaining chips.
The sixth tool is regime change. New governments can renegotiate old understandings, distance themselves from predecessors and demand fresh terms from India.
The seventh tool is public opinion. Smaller neighbours increasingly understand that Indian diplomacy is sensitive to image. If India is portrayed as bullying, New Delhi faces reputational costs.
Together, these tools have changed the neighbourhood balance.
Why India Finds This Frustrating
India’s frustration is understandable.
India often feels that it provides aid, trade access, credit, vaccines, disaster relief, electricity, fuel, medicine, scholarships and security support — yet neighbours still accuse it of dominance. India feels its contributions are underappreciated while China’s role is sometimes romanticised despite debt risks and strategic opacity.
There is truth in this.
India has repeatedly acted as a first responder in the region. It has provided development assistance to Bhutan, emergency support to Sri Lanka, financial help to Maldives, connectivity support to Bangladesh, disaster relief across the region and security cooperation with multiple neighbours.
But geopolitics is not a gratitude economy.
Small states do not permanently align because they received help. They align when they see continuing advantage, respect and reliability. Assistance creates goodwill, but goodwill decays if delivery is slow, tone is arrogant or domestic politics turns hostile.
India must accept that neighbours will bargain. They will use China. They will criticise India. They will ask for concessions. They will diversify partners. That is not always betrayal. Often, it is normal small-state behaviour.
The challenge is to manage it without insecurity.
Why Smaller Neighbours Distrust India
India must also understand why smaller neighbours sometimes distrust it.
Size itself creates fear. India’s economy, military and population are so large that smaller neighbours worry about being overwhelmed. Even friendly policies can be interpreted as pressure. Even reasonable security concerns can sound like interference.
History adds another layer. Nepal remembers treaty grievances and perceived interference. Bangladesh remembers support in 1971 but also fears water insecurity and border deaths. Sri Lanka remembers Indian intervention and Tamil politics. Maldives worries about sovereignty. Bhutan values India but protects its own diplomatic space. Myanmar fears external pressure. Pakistan’s suspicion is structural.
Domestic politics amplifies these fears. Opposition parties in neighbouring countries often accuse ruling parties of being too close to India. Leaders therefore use distance from India as proof of sovereignty.
India cannot eliminate these perceptions completely. But it can reduce them through tone, consultation and delivery.
Respect is not softness. It is strategic discipline.
The China Card Is Powerful But Risky
For smaller neighbours, using China is attractive but risky.
China offers financing, infrastructure, diplomatic support and strategic alternatives. But Chinese projects can carry debt risks, opaque terms, local backlash and long-term dependence. Sri Lanka’s Hambantota experience remains a warning in regional debate. Maldives’ debt pressure also shows that small states can become financially vulnerable when external borrowing rises rapidly.
China also does not offer the same social proximity as India. India has cultural, linguistic, religious, educational, medical and migration links with most neighbours. China can build roads, but it cannot easily replace everyday familiarity.
This gives India a durable advantage.
But durable does not mean automatic. If India takes its cultural advantage for granted, China can still gain strategic space through infrastructure, finance and elite diplomacy.
The China card works because India worries about it. The way to weaken that card is not to forbid neighbours from using it. The way is to make India the more attractive partner.
India’s Mistake: Confusing Influence With Trust
India has influence across South Asia. But influence is not trust.
Influence means neighbours need India. Trust means they believe India will treat them fairly. Influence can create compliance. Trust creates partnership.
India has often relied too much on influence. It assumes geography, market access and cultural ties will keep neighbours aligned. But smaller states are showing that dependence does not prevent resistance. A country can need India and still bargain against it.
Nepal needs India, but uses China. Bangladesh needs India, but explores Chinese options. Maldives needs India, but uses sovereignty politics. Sri Lanka needs India, but balances creditors. Bhutan trusts India, but negotiates with China. Myanmar needs India, but also depends heavily on China.
This is the difference between proximity and partnership.
India’s neighbourhood challenge is not that it lacks power. It is that power alone no longer guarantees loyalty.
What India Should Do
India needs a new approach to small-neighbour bargaining.
First, India should stop treating bargaining as betrayal. Small states bargain because that is how they protect autonomy. India should distinguish between normal diversification and genuinely hostile alignment.
Second, India should deliver projects faster. Delayed Indian projects are one of the easiest openings for China and other external actors.
Third, India should use its market strategically but generously. Access to Indian markets, power grids, digital systems, hospitals, universities and logistics corridors can create dependence that feels beneficial rather than coercive.
Fourth, India should institutionalise consultation with neighbours and with its own border states. Many disputes — Teesta, migration, trade routes, border fencing — require state-level buy-in inside India.
Fifth, India should avoid public humiliation of neighbours. Smaller states are sensitive to dignity. Quiet diplomacy often works better than televised displeasure.
Sixth, India should build regional public goods: disaster response, climate adaptation, health security, digital payments, power connectivity, education, training and food security.
Seventh, India should strengthen platforms such as BIMSTEC. The 6th BIMSTEC Summit in Bangkok adopted the Bangkok Vision 2030 and a maritime transport cooperation agreement, showing that regional frameworks can support connectivity and cooperation beyond SAARC’s limitations.
India must become the partner that neighbours choose even when they have alternatives.
That is the real test.
What Small Neighbours Should Understand
Smaller neighbours also need realism.
Using China to bargain with India can produce short-term leverage, but it can also create long-term vulnerability. Strategic hedging is useful only when it does not become strategic dependence. If a country uses one big power to escape another, it may simply change the source of pressure.
Small states must also recognise India’s legitimate security concerns. A Chinese-backed port, telecom system, road, border project or military facility near India’s sensitive geography will naturally alarm New Delhi. Sovereignty gives neighbours the right to choose partners, but geography means those choices have consequences.
Neighbourhood diplomacy works best when autonomy and sensitivity coexist.
Small neighbours should bargain with India, but not recklessly. India should respect their sovereignty, but not ignore its security.
Both sides need restraint.
The Counter-View: Is India Still Too Dominant to Be Challenged?
There is a strong counter-view that India remains overwhelmingly dominant in South Asia.
India’s economy is far larger than those of its neighbours. Its military capabilities are unmatched in the region except by China and Pakistan. Its market is essential. Its geography is central. Its cultural reach is deep. Its disaster-response capacity is strong. Its development partnerships are extensive.
This is true.
Small neighbours have more bargaining power than before, but they cannot replace India. Bangladesh cannot relocate its geography. Nepal cannot change its southern dependence. Bhutan cannot ignore India’s security role. Maldives cannot escape India’s proximity. Sri Lanka cannot build a stable Indian Ocean policy by excluding India.
So India is not being displaced.
But displacement is not the real issue. The real issue is friction. If every neighbour keeps bargaining harder, India’s regional diplomacy becomes more expensive, more reactive and more insecure.
India can remain dominant and still lose goodwill.
That is the danger.
Editorial View: India Must Learn to Lead a More Assertive Neighbourhood
Small neighbours are gaining bigger bargaining power against India because South Asia has changed.
China has expanded the menu of options. Debt has become strategic. Domestic nationalism has become sharper. Public opinion has become harder to control. Connectivity has become geopolitical. Climate, migration and border pressures have become more intense. Smaller states have learnt that India’s anxieties can be converted into concessions.
India should not respond with irritation alone. It should respond with maturity.
A great power does not panic when smaller states bargain. It understands why they bargain and then makes itself indispensable through performance. India must stop expecting gratitude and start building durable trust. It must stop assuming proximity and start delivering value. It must stop treating every Chinese project as betrayal and start offering better alternatives. It must stop relying on individual leaders and start building society-wide relationships.
India’s neighbours will continue to hedge. That is not going away.
The real question is whether they hedge while staying broadly aligned with India, or hedge because they distrust India.
That difference will decide the future of South Asia.
Small neighbours now have more bargaining power. India still has more structural power. The wise path is not coercion by the big state or provocation by the small state. The wise path is negotiated interdependence.
India’s neighbourhood will not be led by entitlement.
It will be led by trust, delivery and respect.