Initially, various arms of the Indian government were working overtime to play down the muscle-flexing by China to spike a loan from the Asian Development Bank (ADB) as well as alleged skirmishes along the Arunachal Pradesh border between the two countries and claim that it was business as usual. In the last week or so, the government has abruptly ratcheted up tensions, culminating in the very public assent to a proposed visit by the Dalai Lama, the Tibetan spiritual leader, to Tawang in Arunachal Pradesh—the proverbial red flag to a bull as far as China is concerned.

Even while we struggle to make sense of this flip-flop, our neighbour to the west, Pakistan, has all of a sudden been embroiled in an unprecedented internal flare-up, with terrorists claiming about 100 lives in the last week alone through audacious strikes across the country at military and police installations. A meltdown of the state is unlikely, but the developments will definitely strengthen the hands of the Pakistan military which, more than the civilian government, is viewed as being capable of restoring some semblance of order in the country.

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Both these developments—new-found stridency against China and the free run of terrorists in Pakistan—are linked in an indirect way and are throwing up one of the most difficult challenges to India’s foreign policy.

The relationship between China and Pakistan has been well established. And, hence, not surprisingly, there has always been a broad pattern of Chinese aggression on border issues—they have inevitably served as a distraction and coincided with some internal trouble or an apparent weakening of the establishment in Pakistan.

This time, however, it seems to be a bit of this and much more. The Chinese are exhibiting far more insecurity than that required to lend a helping hand to Pakistan.

The border dispute between India and China stems from Tibet. Some parts of Arunachal Pradesh were historically part of Tibet. Since the Chinese claim sovereignty over Tibet, they have been staking claim to these parts of the Indian territory. They have over the years constantly tested India on these claims—denying visas to residents of Arunachal Pradesh and, more recently, by attempting to block a loan from ADB because some of the money was meant for a development project in Arunachal Pradesh. And they raised the ante further after Prime Minister Manmohan Singh’s recent visit to the state.

Part of the reason could be to curb India, which has been rising rapidly in global esteem, despite the handicap of not being part of any key regional grouping or present as a permanent member of the United Nations Security Council. The global meltdown and the emergence of the so-called Group of Twenty, with India as a member, as the new forum for global leadership has only raised India’s stature.

At the same time, China has begun to be buffeted by internal dissent and, if analysts are to be believed, is still vulnerable to another economic shock. In the last one year, violent protests in Tibet, restive ethnic minorities such as the Uighurs in Xinjiang and spread of Islamic terror in interior China have begun to test the political fabric of the country. The response of a totalitarian regime to such dissent, unlike in a democratic framework, can be quite extreme.

If this is indeed correct, then India’s response—allowing the Dalai Lama to visit Arunachal Pradesh—has been equally provocative as it has struck at the core of the Chinese insecurity.

How this will escalate is anybody’s guess, but I just hope that the mandarins at South Block have thought this through.

The reasoning is very simple. If there is one country with a genuine lever on Pakistan, it is China. By alienating it at this point of time, this leverage has been forfeited—at least for now.

Not only is Pakistan being rocked by the terror cells of its own creation, there is every indication that it is not going to do anything to prevent its spread across the border into India.

After a year of diplomatic labour, India has not gained an inch from the Pakistan establishment in terms of prosecuting and shutting down the terror ideologues.

Dependence on intermediaries is imperative since the horrible diplomatic blunder in Sharm el-Sheikh has closed the doors for any immediate dialogue with Pakistan. This leaves only the US—which is seen very negatively by the people and not trusted by the wily military establishment in Pakistan.

Worse, it empowers the US in a way that would make even an American admirer uneasy, especially since there is just a little over a month left before the Prime Minister heads to the White House.

The challenge to Indian foreign policy is clear. Figure a way out of the current imbroglio without making any more compromises and, most importantly, not putting all the eggs in the American basket.

Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at