Extracts from The Economist article on India's strategy in the region and China's role:

Memories in Sri Lanka of India’s troubled role in the long and bitter civil war appear to be fading. Meanwhile, India, officially, does not worry about signs of its neighbour’s dalliance with China.

That is despite the news last month that Chinese investors took 85% control of the project extending Colombo’s main commercial port, which handles goods traded almost entirely with India.

“Sri Lanka is sensitive to the security concerns of India,” says the foreign minister, reassured.

But regardless, Mr Krishna says, India does not (any longer) meddle in the affairs of its neighbours.

“We will not destabilise or divide a nation”, he says firmly.

The desire to ward off any resentment at India throwing its weight about the region is a fairly recent phenomenon. It may explain India’s inaction last week in the Maldives, when an elected ally, President Mohamed Nasheed, was toppled in what looks very much like a coup.

India is quietly vying for greater influence across South Asia. One way to do that is economic. It has offered Sri Lanka a free-trade deal in services (a deal exists already for goods).

Dushni Weerakoon of the Institute of Policy Studies in Colombo says that the concessions are so generous that political pressure for a deal must have trumped economic concerns.

Stitching up closer trade relations elsewhere—for example letting Bangladesh’s booming garment industry export 10m pieces duty-free to India, or bidding for a big Indian investment to extract iron ore in Afghanistan—also looks designed to win friends.

To lessen resentment in the region, India is getting more active as an aid donor. A decade ago that largely meant paying for Bhutan to build big hydropower plants that exported energy back to India.

Today it means big, soft loans, China-style, so neighbours can buy capital goods.

What lies behind this broad Indian push is not hard to divine. Talk to Indian diplomats abroad and its most senior officials in Delhi, and a theme emerges.

“India’s priority is democracy and stability,” says an Indian high commissioner in a nearby country.

Most security types in Delhi have no time for the “string of pearls” theory—the idea that China is seeking to encircle India in its alliances with Pakistan and other neighbours.

Yet they agree that India made mistakes in the past, failing to foster warm ties nearby and so leaving gaps into which Chinese investors, donors and diplomats have stepped.

Full article: Your friendly big brother - The Economist - 18 Feb 2012