South Asia’s strategic environment is undergoing profound transformation. The year 2025, in particular, has exposed the fragility of global and regional alignments. It has tested India’s long-standing foreign-policy assumptions which have been largely self-referential. New Delhi today confronts a deteriorating and unstable neighbourhood; intensifying Chinese penetration across the subcontinent in a strategic encirclement around India and an uncertain and unpredictable United States whose strategic commitments have become ambiguous in general and harsh on India in particular, under the second Trump administration. These shifts challenge India’s long-standing multi-alignment strategy, the room to exercise strategic autonomy and protect Indian national interests. It calls for a recalibration of how New Delhi conceptualizes power, partnerships and security in its immediate and extended neighbourhood alongside its relationships with great powers today—China and the United States.

This essay analyses India’s engagement with the United States within broader geopolitical shifts—China’s expanding footprint, its backing the rise of Pakistan, the uncertain future of Indo-Pacific plurilaterals, the weakening of regional and multilateral institutions and the domestic constraints that shape India’s strategic choices. It argues that India’s current predicament arises from both external disruptions and internal structural limitations. Navigating current geopolitics will require New Delhi to unlearn and re-learn the foundations of its regional and global engagement. It will also be about the realization that without domestic and internal rectifications, India will not be able to translate its strategic potential into strategic leverage—in consonance with our aspirations to become a developed economy by 2047.

The rise of Xi Jinping and the centrality of the Belt and Road Initiative (BRI) to China’s foreign policy have dramatically altered the balance of power in South Asia.1 Beijing’s systematic cultivation of India’s neighbours—from Gwadar in Pakistan to Hambantota in Sri Lanka, Chittagong in Bangladesh and infrastructural partnerships in the Maldives—constitutes a strategic encirclement that India has had to counter. Crucially, all of India’s neighbours except Bhutan are now deeply embedded in China-led connectivity and infrastructure networks.

This shift reflects not only China’s economic scale but also the political appeal it holds for South Asian states that have historically chafed against India’s alleged ‘big-brother’ posture.2 Anti-India sentiment, a recurring feature in the subcontinent, has grown sharper over the past year as political elites across the region invoke electoral narratives of ‘India in’ and ‘India out’ to win elections3—even while accepting China’s more overtly hierarchical, opaque and exploitative engagements through debt traps. The region’s chronic under-integration, persistent trust deficits, and the decay of SAARC have further challenged India’s ability to shape the neighbourhood’s political and economic outcomes.4 But at the same time it has propelled India to look for a wider regional engagement. A few examples will come in handy—BIMSETC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) because SAARC (South Asian Association for Regional Cooperation) is moribund,5 SCO (Shanghai Cooperation Organization) to engage the Central Asian countries building on traditional goodwill with Russia while balancing China,6 and engaging middle order powers through BRICS, even though its economic heft is heavily tilted in China’s favour.7

Internally, India’s neighbourhood policy suffers from sluggish execution, bureaucratic delays, and limited financial resources compared to China. Refugee inflows, internal security spillovers, and unfulfilled trade potential have compounded these challenges whereby India has not been able to leverage enough the people-to-people ties with countries like Nepal, Bangladesh, Sri Lanka and so on.8 While New Delhi has invested in several constructive initiatives—from development partnerships to connectivity projects to capacity-building—these have not offset the scale and speed of China’s regional advances.

This tightening Chinese grip carries significant security implications. China’s role as the primary defence supplier to Pakistan9 and, increasingly to Bangladesh10, has transformed the military balance around India’s periphery. Beijing’s influence over fragmented political landscapes in the region—think Myanmar11—gives it leverage far beyond traditional power politics, creating grey-zone challenges for India through both direct and proxy channels.

For nearly two decades, India’s foreign policy establishment operated on a robust bipartisan consensus in Washington that a stronger India served US strategic interests, particularly in balancing China in the Indo-Pacific. It was initiated by Obama’s ‘Pivot to Asia’12 and reinforced by Trump’s first-term concentration on the Indo-Pacific.13 The strategy was carried forward by the Biden administration’s reinforcement of prioritizing India.14 It is indeed true that the US invested heavily in enabling India’s rise. This support included the civil nuclear deal, exceptional treatment in global nonproliferation regimes, foundational military interoperability agreements, robust tech innovation pathways and the elevation of the Quad as a platform for maritime security cooperation.15

India, until Biden’s term, in turn, hedged its strategic bets by aligning closely with the ‘collective West’. This meant deepening Defence and strategic ties with the US while cultivating productive bilateral relationships with European states and developing the nascent India-EU strategic frameworks for securing vital Sea Lanes of Communication in IOR and the wider Indo Pacific. From New Delhi’s perspective, these were complementary rather than competing alignments.
Galwan crisis of April 2020 further entrenched the indispensability of US intelligence and strategic coordination during high-altitude confrontation with China.

Washington’s gradual retrenchment from the Middle East, coupled with its growing confrontation with Beijing, only reinforced the perception that India’s rise was structurally embedded in America’s long-term geopolitical logic.
However, the return of Donald Trump to power in January 2025 fundamentally disrupted this assumption. Unexpected shifts under Trump’s second term—marked by policy unpredictability, punitive economic measures, aka sanctions, directed at India and ambiguity about the US commitment to Indo-Pacific strategy.

The second Trump administration has upended the foundations of Indo-US strategic convergence. Trump’s foreign policy, shaped by the recently revealed ‘Trump corollary’16 to the Monroe Doctrine, hints at a retrenchment towards the Western Hemisphere even as the administration intermittently engages in military operations in faraway theatres, such as strikes on ISIS in Nigeria17 or B-2 Bomber deployments against Iran to support Israel.18

The disconnect between Trump’s political rhetoric, the National Security Strategy, and the binding provisions of the National Defense Authorization Act—which not only tells where the nearly 1 trillion Defence budget of the US state would go but also mandates sustained US presence in Europe and South Korea—creates significant uncertainty for everyone.19
From New Delhi’s perspective, the most jarring development has been Trump’s decision to impose steep tariffs (steepest globally) on India for purchasing discounted Russian oil, despite previously enabling CAATSA waivers for India’s acquisition of the S-400 system during his first term.20 Coupled with tightening restrictions on H-1B visas and stalled trade negotiations, these moves have shaken India’s confidence in Washington’s reliability. The postponement of the Quad Summit to 2026 even as a 10-year defence framework agreement remains intact21 further complicates the bilateral landscape.
India also misread Trump during Operation Sindoor, triggering an ego clash that he has since carried into his rhetoric on Pakistan and his favour towards Field Marshal Asim Munir.22

This rupture is particularly destabilizing because it undermines a long-standing expectation across India’s strategic community: that US support for India is driven by structural necessity.
The weakening of US-Pakistan Defence ties over the past decade created space for China to emerge as Islamabad’s principal military patron. This shift has magnified India’s security dilemma, particularly as Pakistan leverages Chinese full spectrum support. From grey-zone destabilization to a military stand-off in the world’s first BVR (Beyond Visual Range) battle along the Line of Control which was most recently evident during Operation Sindoor—the iron-clad support from Beijing has proven its mettle.23

Bangladesh, once a reliable partner under Sheikh Hasina, presents an even more complex challenge after her ouster in 2024 and the emergence of a caretaker government under Muhammad Yunus. While trade continues, strategic trust has eroded significantly. Bangladesh’s pivot towards China, its growing military procurement from Beijing and Ankara, and the political volatility within Dhaka have far-reaching implications for India. The Rohingya refugee issue, proximity to India’s vulnerable Siliguri Corridor and coordination between China and Bangladesh amplify India’s threat challenges.24 Even if one could discount a full-fledged war against India, the very losing of a neighbourhood to arch-rival China has more implications than what meets the eye. India-China LAC complex has not been sorted. Despite the Indo-China rapprochement underway since October 2024, and resumption of direct flights, China’s claims on Arunachal and its rhetoric on Taiwan alongside formidable capabilities in the traditional and hybrid domains—all add up to how Xi views the Asian and Indo-Pacific order led and dominated by China.

In sum, the subcontinent remains highly fragile not because of the risk of a large-scale war among nuclear-armed neighbours, but due to persistent grey-zone destabilization25 amid an unresolved border with China, an active front with Pakistan and refugee and demographic pressures across India’s eastern frontier.

These trends deepen India’s need for reliable external partnerships. The United States remains the most important strategic partner, but its unreliability opens other pathways for cooperation with European partners and the EU26, forging re-invigorated trade, tech and critical minerals relationships with Japan27, engaging the neighbourhood constructively by presenting New Delhi as a diversification partner. Just as the Indo Pacific has been a major strategic construct for a few years, the emerging Indo-Mediterranean framework of engagement is noteworthy.28 The latter focuses on building trade and infrastructural connectivity in the Mediterranean region—on both flanks—the South European flank and the North African flank. This engagement complements India’s policy in the Middle East which, at present, engages all actors across the spectrum but risks sanctions from an unpredictable Trump on trade and investment ties with Iran.

India’s external challenges are compounded by domestic structural limitations.29 Despite steady progress, India’s investment ecosystem and ease of doing business have not yet produced the scale of manufacturing needed to reduce dependence on imports from China. Manufacturing continues to hover around 15-17 per cent of GDP—far below the ambitions outlined in the ‘Make in India’ strategy.30 While FDI inflows have increased, the $80 billion received this year remains modest relative to the size of India’s economy.31

This creates a paradox—India’s exports to the US and Europe rise, but its imports from China rise even faster, deepening strategic dependence. India’s comparative advantage remains in services. Yet restrictive US visa policies risk diverting Indian talent to Europe or Japan rather than bringing it back to India—a consequence of India’s long-standing underinvestment in research and development and its still-nascent innovation ecosystem.

In Defence, India faces pressing capability gaps. With Defence spending at only around 2 percent of GDP, India must focus not on large power projection platforms—such as a third aircraft carrier—but on grey-zone capabilities—drones, maritime surveillance systems, satellites and cyber capabilities. The importance of integrated command-and-control systems optimally linked by efficient data links is a must, especially after Operation Sindoor. Acquisition delays and inefficient domestic production of LCA Tejas further weaken India’s deterrence posture at a time when China is rapidly modernizing its arsenals and battle testing equipment against India via Pakistan.

The evolving strategic landscape calls for a fundamental reassessment of India’s external engagement. Several imperatives emerge:

First, Strengthening grey-zone and asymmetric capabilities rather than batting for power-projection platforms.
Second, Enhancing economic competitiveness through deeper structural reforms, sustained R&D investments, and positioning India as a credible manufacturing alternative in emerging global supply chains.

Third, Rebuilding regional relationships with clarity and consistency. Diplomatic goodwill must be accompanied by timely infrastructures and targeted economic outcomes. India must leverage the 4000 km border it shares with Bangladesh which is the major route for trade. India must also actively seek triangulated cooperation with other countries such as Japan’s or EU’s presence in India’s East or UAE’s in Sri Lanka to maximize outcomes.

Fourth, Maintaining diversified strategic partnerships, including with the EU, Japan, ASEAN, and other middle powers, to offset uncertainty in US policy. India also needs to carefully analyse the degree to which Russia is getting dependent on China because of a protracted war in Ukraine. Clarity on such fundamentals will enable the country to build lasting frameworks of cooperation with old and new partners, in better consonance with India’s national interest.

Fifth, Institutionalizing Indo-US cooperation in ways that could insulate it from political volatility— through long-term Defence agreements, supply-chain frameworks, and co-development mechanisms.

India today stands at a strategic inflection point. In this fluid environment, India must craft a strategy grounded not in past nostalgia, but in a clear-eyed assessment of emerging realities. This requires enhancing domestic capabilities, rebuilding regional trust and diversifying strategic partnerships—even as New Delhi sustains and stabilizes its vital relationship with the United States. Only by doing so can India navigate the evolving strategic volatility of South Asia and assert itself as a credible and resilient actor.

(Endnotes)
1. https://csep.org/reports/how-china-engages-south-asia-in-the-open-and-behind-the-scenes/
2. https://www.ejsss.net.in/uploads/172/15880_pdf.pdf
3. https://www.orfonline.org/research/understanding-the-india-out-campaign-in-maldives
4. https://www.thehindu.com/opinion/op-ed/the-sorry-state-of-south-asian-economic-integration/article69728619.ece
5. https://www.orfonline.org/research/bimstec-seeks-to-succeed-where-saarc-failed
6. https://www.orfonline.org/research/india-s-balancing-act-in-the-sco
7. https://www.orfonline.org/research/brics-and-bri-china-aims-for-strategic-alignment
8. https://iapss.org/indias-eroding-influence-in-south-asia-a-structural-decline/
9. https://www.dawn.com/news/1963311
10. https://southasiajournal.net/report-china-has-transferred-military-technology-to-bangladesh
11. https://www.foreignaffairs.com/china/chinas-double-game-myanmar
12. https://www.cfr.org/project/us-pivot-asia-and-american-grand-strategy
13. https://www.cfr.org/expert-brief/us-indo-pacific-strategy-needs-more-indian-ocean
14. https://www.rand.org/pubs/commentary/2021/08/bidens-indo-pacific-policy-blueprint-emerges.html
15. https://www.state.gov/u-s-security-cooperation-with-india
16. https://www.foreignaffairs.com/united-states/what-happened-west
17. https://www.africom.mil/pressrelease/36158/us-africa-command-conducts-strike-against-isis-in-nigeria
18. https://www.airandspaceforces.com/us-strikes-iranian-nuclear-facilities-b-2-bombers-cruise-missiles/
19. https://theprint.in/opinion/nss-to-ndaa-the-gap-between-trumps-maga-worldview-and-us-actions-is-impossible-to-ignore/2804304/
20. https://www.ndtv.com/world-news/donald-trump-on-sanctions-for-s-400-deal-with-russia-india-will-find-out-1930129
21. https://www.vifindia.org/article/2025/november/07/Framework-For-the-US-India-Major-Defence-Partnership-2025
22. https://www.orfonline.org/research/trump-and-munir-s-bonhomie-and-the-revival-of-u-s-pakistan-transactional-engagement
23. https://carnegieendowment.org/research/2025/10/military-lessons-from-operation-sindoor?lang=en
24. https://economictimes.indiatimes.com/news/india/watch-the-fragile-corridor-bangladeshs-fluid-political-landscape-necessitates-vigilance-in-the-chickens-neck/articleshow/126211554.cms?from=mdr
25. https://takshashila.org.in/content/publications/20251014-Deciphering-the-Grey-Zone.html
26. https://ecfr.eu/publication/pivot-to-europe-indias-back-up-plan-in-trumps-world/
27. https://theprint.in/opinion/india-must-move-japan-from-old-friend-trap-to-real-partners/2731559/
28. https://cnky.in/the-rise-of-the-indo-mediterranean-in-global-strategic-narratives/
29. https://indianexpress.com/article/opinion/columns/behind-indias-economic-slowdown-our-very-own-deep-state-9796010/
30. https://carnegieendowment.org/india/ideas-and-institutions/is-the-make-in-india-initiative-working-or-mihai-varga-on-world-bank-led-land-reforms-in-eurasia?lang=en
31. https://www.thehindu.com/business/Economy/net-fdi-negative-for-third-straight-month-in-october-2025-as-inflows-fell-outflows-grew/article70433074.ece

Swasti Rao, Associate Professor and Associate Dean (Global Initiatives), Jindal School for International Affairs, JGU, is Consultant, Defence Industrial Corridor, MoD, Consulting Editor for International and Strategic Affairs, The Print and Non-Resident Fellow, Eastern Circles, Paris.