Saarc: India woos neighbours

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 Hindu nationalist 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 told AFP, welcoming Modi's pledge to help smaller nations reduce their trade deficits with India.

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.

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.