On Sunday, President Obama met with Prime Minister Manmohan Singh in New Delhi. They discussed opportunities for expanded Indo-American trade, and both leaders highlighted the strategic importance of a strong and prosperous India in the face of Chinese expansion. But Prime Minister Singh did not acknowledge, and President Obama did not bring up, the most important obstacle to India’s success: its poor regional relationships.

From the outset, India’s promise as a rival to China has been that it is a power apart. It could not beat Beijing in a race for pure growth or military might. But in a contest over principles, India’s democratic progress offers the region a model that China cannot match. India should be a partner for countries seeking a fair alternative to alliance with its authoritarian neighbor.

But India is losing this contest, and it is losing it close to home. Now, as President Obama leaves India, it is worth asking: Why isn’t South Asia’s richest country leading more effectively in South Asia?

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China is flexing its muscle

China is certainly flexing its muscle. Last month, it sought to restrict exports of rare earth minerals to Japan, made overtures to a secession movement in southern Sudan, and wrestled with the G20 over its currency and trade imbalance.

Nowhere has China been more assertive than in South Asia. In a strategy it calls the “string of pearls,” China is building ports and infrastructure in Bangladesh and Pakistan; digging up minerals in Pakistan and Afghanistan; and refining hydropower in Nepal and Afghanistan.

According to the International Monetary Fund, China’s trade with India’s neighbors totaled $16 billion in 2008, growing at 14 percent annually. India’s regional trade was barely holding steady at $11 billion.

India's overconfidence

Yet China’s success in the Subcontinent reflects India’s own foreign policy blunders.

First, India has been overconfident, assuming that regional neighbors would naturally choose it over Beijing without providing them with positive incentives to do so. That is the case in Bangladesh, a desperately poor country created with the assistance of Indian forces, whose multiple requests for economic aid and greater bilateral trade India has rebuffed. While Bangladeshis wonder why India does not do more, India wonders why Bangladesh is not more appreciative.

Beijing capitalizes on the gap between them.

Interfering and overbearing

Second, India has been overbearing, giving selective support to political movements inside neighboring states.

In Nepal, India backed a feudal aristocracy for four decades, reinstating the monarchy by force after repeated popular revolts. It trained the Nepalese military, and orchestrated political marriages between Nepalese aristocrats and wealthy Indian families. Pushing India out became the top priority of the Maoist guerilla movement that has majority support and an informal alliance with China.

As the UN peace mission holding Nepal together prepares to close in January, India is pitted against China to control the postwar settlement, with Nepal’s critical water resources (about 83,000 megawatts of hydropower) at stake. The confrontation is reminiscent of the situation in Burma (Myanmar), where China and India spent $10 billion last year to secure the support of a military junta guilty of abusing its own subjects.

As the weaker power, India has more to fear from these confrontations.

Shutting out the region

Third, India has been suspicious, choosing to shut out the region when relations go sour rather than addressing underlying tensions.

Earlier this year, the government announced an immigration regime that will restrict multiple entry visas. Multinationals have protested the move as a blow to business travelers from the West and the Persian Gulf, but its greatest victims are migrant laborers from Bangladesh and Nepal. Many will turn to China for employment instead; others will enter illegally, bringing crime with them.

Nowhere has suspicion been more crippling to Indian policy than in the case of Pakistan. So long as Kashmiri militants – with historic ties to Pakistan – continue to operate inside India, India maintains it cannot meet with Pakistan over the disputed border, or over critical resources like water and gas. But it is the ongoing dispute that creates the very basis for this militancy. In a country with porous mountain borders, such threats are virtually impossible to block out by force.

Yet New Delhi means to try.

US as accomplice to India's bad policy

Unfortunately, the United States has been an accomplice to India’s regional isolationism. In 2008, pressure from Washington shut down a natural gas project involving India, Pakistan, and Iran. Last year, Present Obama briefly considered appointing Amb. Richard Holbrooke as a regional envoy, with the authority to conduct dialogue between India and Pakistan, but narrowed his brief to Afghanistan and Pakistan over Indian opposition.

Asked about Pakistan at a town hall meeting in New Delhi on Sunday, the president reiterated that the United States would not intervene in the Kashmir dispute. Yet without an Indo-Pak peace, no strategy for Afghanistan can move forward.

The trappings of global status, without the substance

The West has lavished India with the trappings of global status: a seat at the G20, a temporary seat at the UN Security Council that may open the door to a permanent one, a controversial US-India nuclear deal, and two pending defense trades worth more than $15 billion dollars.

To read Indian newspapers or speak to diplomats is to believe that these gestures represent global influence. But in fact, they signal the rise of a Potemkin hegemon. If India is encircled by China’s string of pearls, and if migrants and militants compromise its borders, then it will be forced to waste its economic resources putting out local fires, unable to project power further afield.

Moreover, as they watch this regional saga, potential partners in Africa, the Middle East, or Central Asia see India as a country that treats its neighbors with contempt. Indian leaders can argue that other great powers have done the same, but the argument misunderstands the very nature and purpose of India’s rise, the unique role that ideals must play in India’s success.

To be sure there are steps India can take to reverse this course. If it accepts international mediation in Kashmir, if it becomes a neutral partner for peace in Burma and Nepal, and if it opens its markets to greater regional trade, it may yet salvage its position as the democratic counter-power to China. But these are long-term solutions, and the window to pursue them is shrinking.

Maha Rafi Atal is a journalist in New York, recently returned from India, Pakistan, and Nepal where she was a correspondent for the Pulitzer Center on Crisis Reporting.