A Framework to Assess India’s Economic Diplomacy in its Neighbourhood
Takshashila Discussion Document 2025-14 - Version 1.0
Executive Summary
This paper articulates three overarching goals that must underpin India’s neighbourhood economic diplomacy. First is the pursuit of regional stability through economic integration and partnerships, which in turn contribute to India’s domestic growth. Second is the consolidation of India’s position as the preeminent regional power, an ambition that inherently involves managing and mitigating the challenge posed by China. Third is the cultivation of goodwill and regional reputation, recognising that intangible assets, such as credibility and trust, enhance India’s influence and legitimacy.
By applying a framework to assess India’s economic diplomacy toolkit in the neighbourhood, the paper concludes that:
Low-input tools require less diplomatic wrangling and lower-level political cooperation with partner countries. Whether or not the impact of low-input tools is high or low, India must continue to invest in these tools in large numbers, to gradually enhance the degree of interdependence between itself and the neighbouring economy.
If a high-input tool can yield significant impact and sustained outcomes, it must be invested in and prioritised over multiple low-input, high-impact, or comforting-but-redundant high-input tools. In other words, India’s neighbourhood policy may want to experiment with previously untouched measures to fulfil its objectives.
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