NEW DELHI (Reuters) - The Tibetan spiritual leader, the Dalai Lama, faces increasing isolation in his home in exile as India tones down an assertive stand toward its powerful neighbor and rival, China, in the hope of calming ties strained by a border stand-off.

FILE PHOTO: Tibetan spiritual leader Dalai Lama speaks during an interactive session in Bomdila in the northeastern state of Arunachal Pradesh, India April 5, 2017. REUTERS/Anuwar Hazarika/File photo

The Asian giants were locked in a 73-day military face off in a remote, high-altitude stretch of their disputed border last year, with, at one point, soldiers from the two sides throwing punches and stones at each other.

The confrontation between the nuclear-armed powers in the Himalayas underscored Indian alarm at China’s expanding security and economic links in South Asia.

China’s ambitious Belt and Road initiative of transport and energy links bypasses India, apart from a corner of the disputed Kashmir region, also claimed by Pakistan, but involves India’s neighbors Sri Lanka, Nepal and the Maldives.

Now Prime Minister Narendra Modi’s nationalist government, is reversing course, apparently after realizing its hard line on China was not working, and the Dalai Lama is facing the cold shoulder.

“We are moving forward with this relationship, the idea is to put the events of 2017 behind us,” an Indian government source involved in China policy said.

The idea is to “be sensitive” to each other’s core concerns and not let differences turn into disputes, the source said.

The Dalai Lama has lived mostly in the north Indian town of Dharamsala since 1959, when he fled a Chinese crackdown on an uprising in his homeland.

In Dharamsala, his supporters run a small government in exile and campaign for autonomy for Tibet by peaceful means. India has allowed him to pursue his religious activities in the country and to travel abroad.

Early this month, India issued an unprecedented ban on Tibetans holding a rally with the Dalai Lama in New Delhi to mark the 60th anniversary of the start of the failed uprising against Chinese rule.

‘DEEPLY RESPECTED’

This week, the Dalai Lama canceled a visit to the Indian border state of Sikkim this week, hosted by authorities there, officials say, lest it offended China.

Sikkim is south of the Doklam plateau where the hundreds of Indian and Chinese soldiers confronted each other last year after India objected to China’s construction of a road in an area claimed by India’s tiny ally, Bhutan.

Even “thank you” rallies by Tibetans planned for New Delhi to show appreciation to India for hosting the Dalai Lama and his followers have been shifted to Dharamsala.

India’s foreign ministry said the government had not changed its position on the Dalai Lama.

“He is a revered religious leader and is deeply respected by the people of India. His Holiness is accorded all freedom to carry out his religious activities in India,” spokesman Raveesh Kumar said.

But India’s recent attitude is in stark contrast with his former treatment.

In 2016, the Dalai Lama was invited to India’s presidential palace for a ceremony honoring Nobel Peace prize winners. The government later allowed him to visit the disputed state of Arunachal Pradesh, disregarding Chinese objections.

China reviles the Dalai Lama as a dangerous separatist and his activities in India have always been a source of friction, and a tool with which India can needle China.

“Tibet has utility to irritate China, but it is becoming costly for us now. They are punishing us,” said P. Stobdan, a former Indian ambassador.

China has blocked India’s membership of a nuclear cartel and it also blocks U.N. sanctions against a Pakistan-based militant leader blamed for attacks on India.

‘UNDERSTANDING AND RESPECT’

The Tibetan government-in-exile has been phlegmatic, expressing understanding of the shifting circumstances and gratitude to India for hosting the Dalai Lama for 60 years.

“The Indian government has its reasons why, these coming months are sensitive, and we completely understand and respect that so there’s no disappointment at all,” Lobsang Sangay, the head of the government in exile told reporters.

China has hailed better ties.

“Everyone can see that recently, due to the efforts of both sides, China-India relations have maintained positive momentum and development, and exchanges and cooperation in all areas have achieved new progress,” Chinese foreign ministry spokesman Lu Kang said on Thursday.

Lu said China was willing to work with India to maintain exchanges on all levels and to increase mutual political trust and “appropriately control differences”.

A flurry of visits is planned.

Next week, India National Security Adviser Ajit Doval is heading to China and Foreign Minister Sushma Swaraj is due to visit in April.

Modi will visit in June for a regional conference and talks with President Xi Jinping.

The two sides are also expected to revive “hand-in-hand” counter-terrorism exercises when India’s defense minister, Nirmala Sitharaman, visits China in April, a defense source said. The drills were suspended earlier.