Context: According to a Brookings India study, most South Asian nations are now largely dependent on China for imports despite geographical proximity to India.
Key Points

• As India-China border tensions continue to fester, a hegemonic China, as part of its global expansionism, is chipping away at India’s interests in South Asia.
• Several foreign policy experts argue that India’s strategic dealing with China has to begin with South Asia by reinvigorating SAARC, which has been inactive since 2014.

China’s contemporary relations with India’s neighbors

• China’s proximity to Pakistan has been strengthened by the China–Pakistan Economic Corridor (CPEC) project.
• Nepal is also moving closer to China for ideational and material reasons. 
• China is wooing Bangladesh by offering tariff exemption to 97% of Bangladeshi products
• China has also intensified its ties with Sri Lanka through massive investments. 

Ignoring SAARC

• Isolating Pakistan: India has been trying hard to isolate Pakistan internationally for its role in promoting terrorism in India.

Alternatives to SAARC

• India started investing in other regional instruments such as BIMSTEC but it cannot replace SAARC for reasons such as lack of a common identity and history among all BIMSTEC members.
• As BIMSTEC’s focus is on the Bay of Bengal region, it is an inappropriate forum to engage all South Asian nations.
• Many foreign policy experts argue that India’s strategic dealing with China has to begin with South Asia.

Infusing life in SAARC by reviving the process of South Asian economic integration

Trade

• South Asia is one of the least integrated regions in the world with intra-regional trade teetering at 5% of total South Asian trade as compared to 25% of intra-regional trade in the ASEAN region.

Trade treaties

• While South Asian countries have signed trade treaties, the lack of political will and trust deficit has prevented any meaningful movement.
• India should take the lead and work with its neighbours to slash the tariff and non-tariff barriers.

Investments

• There’s a need to rejuvenate the negotiations on a SAARC investment treaty which has been pending since 2007.
• According to the UN Conference on Trade and Development, intra-ASEAN investments constitute around 19% of the total investments in the region.
• The SAARC region can likewise benefit from higher intra-SAARC investment flows.
• There are certain domestic issues of India in reviving SAARC.

Domestic challenges in revitalising SAARC
Ideological reasons

• There has been an anti-Pakistan and Bangladesh migrant rhetoric due to ideological reasons and to reap political dividends.
• Denting soft power: Majoritarian politics dents India’s soft power of being a liberal and secular democracy which gives moral legitimacy to India’s leadership in the region.

Complexity in the economic vision:

• There is a lack of clarity on the slogans of atma nirbharta (self-reliance) and ‘vocal for local’ mean.
• Protectionism: The government is stating that India needs to cut down its dependence on imports which signal a return to the obsolete economic philosophy of import substitution. This questions India’s interests in deepening South Asian economic integration.