KATHMANDU: India pledged a slew of regional investments at a South Asian summit this week, seeking to counter China's growing economic inroads into its backyard as it remains embroiled in bitter rivalry with Pakistan.

Indian Prime Minister Narendra Modi said South Asia's largest economy would fund regional infrastructure, health facilities and even a communications satellite, and promised to free up its markets to exporters in smaller countries in the region.

Modi, who won a landslide election victory in May, has made clear that boosting India's influence in its immediate neighbourhood is a key strategic priority for his government.

Critics say the previous Congress party government began to take relationships for granted, allowing economic giant China — which shares a border with four of India's neighbours — to step into the breach.

But the failure of the South Asian Association for Regional Cooperation (Saarc) to make any significant progress during a two-day meeting underscored the scale of the challenge New Delhi faces.

Cross-border trade among the eight Saarc nations — Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka — still accounts for less than five percent of total commerce in the region.

“Indians want to keep South Asia as their exclusive sphere of influence,” said Sreeram Chaulia, dean of the Jindal School of International Affairs in Delhi.

“To do that ... we need to play the economic game and we need to play the connectivity game better. We have been protectionist, and that is not good,” he said, welcoming Modi's pledge to help smaller nations reduce their trade deficits with India.

Deeper pockets

Leaders signed just one agreement, on energy cooperation, at a summit that was overshadowed by the rivalries between India and Pakistan, leading host country Nepal's Prime Minister Sushil Koirala to say that Saarc had fallen short of expectations.

Nepal, long under the political influence of New Delhi, has benefited hugely from China's bounty over the last decade, getting much-needed new roads and other infrastructure. Even the venue where the leaders met was built with Chinese money.

It is among several Saarc nations including Pakistan and Sri Lanka that reportedly support full membership for China, which currently enjoys observer status in the regional grouping.

India has resisted promoting its regional rival to full membership status, which comes with the power to veto agreements.

Frustrated by the slow pace of progress towards regional cooperation, it has also sought to woo its neighbours outside the Saarc framework.

Modi held separate meetings with all the Saarc leaders except Pakistan's on the summit's sidelines, and agreed a deal to invest in a major hydropower plant in Nepal shortly after arriving.

But China has deeper pockets than India, which also suffers from a reputation for unwanted interference in the domestic affairs of some of its neighbours.

Nepalese newspapers criticised Modi for urging the country's leaders to complete a constitution-drafting process that has dragged on for years shortly after he landed.

“While his advice is correct, the place and context were wrong,” the Republica daily said in an editorial, accusing the Indian leader of violating “diplomatic decorum”.

Analyst Tanvi Madan of the Washington-based Brookings Institution said it was natural for the smaller Saarc states to cozy up to China.

“Indian policymakers and analysts objecting loudly to these links is futile and, arguably, counterproductive,” she wrote in a briefing paper ahead of the summit.

“An effective Indian approach requires presenting a viable alternative. It means convincing Saarc countries that it wants to take them along on the path to economic prosperity.”

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