Opinion: India Must Counter China’s Growing Economic Influence in South Asia

On January 1, 2025, the Maldives implemented its free trade agreement (FTA) with China, a move India had anticipated with concern. As China continues to expand its economic footprint in South Asia, negotiating similar FTAs with Bangladesh and Sri Lanka, India must reassess its strategy to remain relevant in its neighborhood.

China's Growing Influence in South Asia

China’s economic presence in South Asia has grown exponentially over the past two decades. With well-established supply chains, competitive manufacturing bases, and the Belt and Road Initiative (BRI), Beijing has positioned itself as a top trading partner for countries like Pakistan, Sri Lanka, and Bangladesh. These FTAs facilitate cheaper exports, enhance BRI projects, and provide China with economic leverage in the region.

Meanwhile, smaller South Asian nations, grappling with economic challenges, view these agreements as an opportunity. Bangladesh faces the loss of preferential trade benefits as it transitions from least-developed country status in 2026. Sri Lanka, recovering from an economic crisis, sees trade agreements as critical to its recovery. The Maldives, with limited production and rising import costs, also benefits from such partnerships.

India’s Role and Missed Opportunities

India, with its geographic advantage and strong economic ties, remains a crucial partner for its neighbors. Over the past decade, India’s exports to Sri Lanka, Bangladesh, and the Maldives have grown significantly. However, this growth lags behind China’s rapid expansion. India’s concerns over Chinese goods flooding South Asian markets via FTAs have led to delays in its trade negotiations, such as the paused FTA talks with Bangladesh.

A Proactive Strategy for India

India must drop its protectionist skepticism and leverage the current momentum. By expediting trade negotiations, investing in regional connectivity, and opening its markets to smaller neighbors, India can strengthen its economic interdependence in South Asia. Proactive engagement, rather than hesitation, will be key to countering China’s influence and ensuring India’s leadership in the region’s economic landscape.