India’s regional connectivity strategy is at a crossroads despite it being a policy priority for New Delhi. Notwithstanding its vast economic potential, South Asia remains one of the least connected regions globally, with intra-regional trade languishing at just 5%—a stark contrast to 22% in sub-Saharan Africa and 25% in Southeast Asia, as reported by The World Bank. The ‘Neighbourhood First’ policy announced in 2014 marked a renewed push for New Delhi to deepen ties through ‘connectivity, commerce, and contact.’ However, geopolitical shifts and intensifying challenges in the region, including the increasing presence of China in infrastructure projects and the recent suspension of U.S. aid, have necessitated a rethink on connectivity. The question is: What steps should India take in the next decade to transform its neighbourhood into a thriving, integrated economic zone, and what should be the core elements of its connectivity strategy?
Hits and Misses: A Decade of Regional Connectivity
Since 2014, Prime Minister Narendra Modi has visited India’s neighbourhood approximately twenty times—a record compared to his predecessors—including five visits to Nepal and three each to Sri Lanka and Bhutan. Notably, 2016 marked the first-ever visit of an Indian Defence Minister (by Manohar Parrikar) to Bangladesh. These high-level engagements have often led to new connectivity announcements. Yet, a decade after India’s regional connectivity record remains a mix of notable achievements and persistent challenges.
On the positive side, India has operationalised 12 Integrated Check Posts (ICPs) along its land borders since 2012 with Bangladesh, Myanmar, Nepal and Pakistan, inaugurated the first cross-border passenger railway link with Nepal, completed six out of seven historical railway links, and launched inland waterways with Bangladesh. The Sittwe Port in Myanmar – constructed by India, has been activated, and air and ferry services with Sri Lanka have restarted. Two cross-border pipelines with Nepal and Bangladesh have been completed, and India has recently supported the first sub-regional trilateral power transmission line linking Nepal to Bangladesh via India. These milestones, among others, reflect significant momentum in enhancing cross-border connectivity.
On the other hand, despite more rail links today, cross-border freight movement by rail accounts for less than 4% of total trade. The Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement (BBIN-MVA), even without Bhutan, is still awaiting operationalisation. Coastal shipping between India and Bangladesh, despite an agreement, continues to lag. Ground-level issues like inconsistent standard operating procedures in freight and passenger movement, and customs inefficiencies hamper seamless trade. Non-tariff barriers persist, undermining the reduction of cost and time of doing trade through the new infrastructure. Moreover, institutional mechanisms—both bilateral and regional levels, such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) —often lack the capacity or political will to fully implement connectivity initiatives.
The past decade laid a strong foundation, but addressing these challenges is essential for India to turn its regional connectivity ambitions into sustained success. This is increasingly important as the region is witnessing political and geostrategic shifts. Bangladesh’s regime change in 2024 introduced uncertainties and complicated bilateral projects. Strained ties with Nepal’s Prime Minister K.P. Sharma Oli, who prioritised China over India for his first visit abroad, signalled shifting dynamics. Myanmar’s state dysfunction continues to hinder India’s land connectivity to Southeast Asia. Meanwhile, relations with Sri Lanka and the Maldives progressed through normalisation efforts and expanded development cooperation. These shifts highlight the urgency for a more adaptive and strategic regional connectivity approach.
The Compulsions for a Renewed Strategy
Three overarching compulsions necessitate India’s re-examination of its regional connectivity strategy—first, the need for comprehensive regional security with the neighbourhood. The 1999 Kargil Review Committee (KRC) emphasised the need for a holistic approach to national and border security. Following its recommendations, the Group of Ministers in 2000 stressed the importance of non-military measures, highlighting that beyond the armed security approach, a wider range of measures would be required to safeguard national security and border management. This led to the establishment of the Department of Border Management in 2004, which further paved the way for initiatives like Integrated Check Posts (ICPs), which streamline border management while promoting trade and people-to-people connectivity. Therefore, connectivity projects were essential for regulating the border to ensure a holistic approach to security.
The past decade laid a strong foundation, but addressing these challenges is essential for India to turn its regional connectivity ambitions into sustained success. This is increasingly important as the region is witnessing political and geostrategic shifts… These shifts highlight the urgency for a more adaptive and strategic regional connectivity approach.
Second, the importance of shared economic growth as India’s economic ambitions are intertwined with the prosperity of its neighbours. Bangladesh is now India’s largest South Asian trade partner and among the top ten export destinations for India in the last few years. Border economies, particularly those along Bangladesh and Myanmar, are deeply interconnected. A World Bank report in 2018 had highlighted that the potential of an economically integrated South Asia is three times its current level. Regional economic stagnation hampers India’s growth aspirations. Connectivity projects that integrate markets are vital for mutual economic resilience.
Third, New Delhi’s global leadership ambitions start in its neighbourhood. India’s emergence as a regional power and a security provider in the Indo-Pacific depends heavily on its ability to deepen ties with its immediate neighbourhood. In an increasingly multipolar world, where diverse actors are present in India’s neighbourhood, such as Australia, Japan, the U.S., and China, connectivity has emerged as a strategic tool and an area where India has shown the will to deliver. Therefore, fostering stability through connectivity is crucial for India’s security and economic interests.
Towards a New Connectivity Doctrine: Four Strategic Approaches
To achieve these goals and chart a forward-looking connectivity strategy for the next decade, India must adopt a multifaceted approach centred on four key pillars:
First, India’s connectivity strategy will need collaboration with external partners. New Delhi must deepen partnerships with like-minded actors like Japan, the United States, and Australia. These partnerships can be supported through project development, technical expertise and financing. For example, Japan’s engagement on projects like the Matarbari deep sea port in Bangladesh, with the potential to develop linkages to India’s northeast region, demonstrates the value of creating connectivity synergies with like-minded partners in India’s neighbourhood. Additionally, mechanisms like the Quad offer platforms to coordinate connectivity initiatives, including strengthening maritime links and disaster management.
Second, public sector initiatives must be complemented with proactive engagement with the private sector. Public-private partnerships (PPPs) can play a transformative role in bridging infrastructure and operational gaps. The private sector’s expertise in project execution and management can complement government efforts. For instance, India could incentivise private investment in regional infrastructure by offering tax benefits or risk-sharing mechanisms, as done through the Concessional Financing Scheme, which incentivises the Indian private sector bidding for strategic projects abroad. In railways, India could open all cross-border movement to private container train operators. Collaborative models in sectors like logistics, renewable energy, and digital connectivity could unlock new opportunities by improving efficiency.
Third, New Delhi must leverage the varied financing mechanisms for connectivity projects. So far, most of India’s projects abroad have been delivered through grants. India should maximise the potential of diverse financing options, including through the Lines of Credit (LoCs) – a type of concessional financing – that has the potential to increase efficiencies and enable long-term funding support. Nearly 45% of India’s LoCs are now directed towards its neighbourhood, with Bangladesh being the largest recipient at $7.86 billion, yet the utilisation has not picked up due to complicated operational procedures. India must play to its strengths in financing by promoting the uptake of LoCs and focusing on cost-effective and scalable solutions.
Finally, strong institutional cooperation will remain an essential prerequisite to the completion of connectivity projects abroad. At the 2018 Shangri La Dialogue, PM Modi emphasised that connectivity is vital as it not only focuses on building infrastructure but also on building trust. Institutional cooperation is key to maintaining this trust and ensuring robust connectivity.
India should prioritise the coordination and cooperation between various agencies and institutions both at the central and state levels. This would include cooperation beyond the foreign offices to rely on, for example, railway ministries, as well as coordination between the customs and security agencies at the ground level through regular meetings. This can lead to streamlined regulatory frameworks, harmonised standards, and the fostering of trust through regular consultations, which can create an enabling environment for connectivity.
A robust connectivity strategy is not just a means to economic integration but a pathway to realising India’s vision of becoming a regional power. Therefore, it is essential that New Delhi’s regional connectivity strategy for the next decade must evolve to address the dynamic geopolitical and economic landscape of its neighbourhood.
