Since the election of Donald Trump as U.S. president for the second time, Washington has suspended key foreign aid programs around the globe, impacting many developing countries, including in South Asia. This development has consequently created an opportunity for Beijing to further boost its influence in the region as it expands infrastructure financing and development initiatives and presents itself as an essential regional partner.
While the United States has traditionally focused on humanitarian grants, China prioritizes loans and debt-driven infrastructure projects, creating strategic dependencies that it can use as geopolitical leverage to secure its interests. In this context, India has an opportunity to fill the humanitarian aid vacuum in South Asia. By promoting democratic values and people-centric aid, India can counter China’s transactional diplomacy, fill the U.S. aid gap, and strengthen sustainable regional ties through enhanced soft power.
Struggles in a Politically Volatile Bangladesh
The Trump administration’s abrupt withdrawal of funding via the United States Agency for International Development (USAID) has severely impacted developing countries like Bangladesh, especially in health and education. The cancellation of emergency food aid disrupted the supply for malnourished children, while cuts led to widespread unemployment among local contractors, educators, and healthcare workers.
Washington’s retreat in Bangladesh comes at an inopportune time for New Delhi. Bangladesh’s interim government, led by Chief Advisor Muhammad Yunus, has forged major deals with China, inviting it to play a larger role in the country’s economy. At the same time, India-Bangladesh relations are at a historic low. The withdrawal of U.S. aid may now further compel Dhaka to engage with Beijing on a larger scale.
Since joining China’s Belt and Road Initiative (BRI) in 2016, Bangladesh has welcomed Chinese investment, primarily in infrastructure. But in recent years, Beijing’s influence elsewhere has expanded into areas such as law enforcement training, digital governance, and exchanges on electoral practices, which have a direct impact on domestic politics and democracy. With Dhaka indicating interest in such cooperation in the most recent China-Bangladesh joint statement, this development carries great strategic significance for New Delhi, which has historically positioned itself as a democratic development partner to Bangladesh. Since 2010, New Delhi has extended USD $8 billion in Lines of Credit to Dhaka, its largest to any country, for infrastructure, connectivity, energy, and social sector projects. But after the removal of former Prime Minister Sheikh Hasina, New Delhi has complained of the disruption of its projects in Bangladesh as a result of the internal political crisis. Key institutional entry points through which India once engaged have since been closed off, and U.S. withdrawal has only further enabled China’s edge.
By promoting democratic values and people-centric aid, India can counter China’s transactional diplomacy, fill the U.S. aid gap, and strengthen sustainable regional ties through enhanced soft power.
Despite these geopolitical setbacks, New Delhi still has the opportunity to engage with Bangladesh through a humanitarian partnership. In particular, Bangladesh continues to struggle with managing the Rohingya crisis, hosting nearly one million refugees, mostly in Cox’s Bazar. While the United States has been a major aid provider in recent years—providing over USD $2.4 billion worth of aid since 2017 to Rohingya refugees—cuts in U.S. aid have threatened significant shortfalls in Rohingya food rations this year. While the United States has recently pledged USD $75 million in new aid to the Rohingyas for the meantime, Washington’s broader approach to aid abroad in Trump 2.0 suggests its support could be fickle hereon. Although China has made some contributions to the Rohingyas recently, its support does not go far enough.
While the goal of safe, voluntary, and dignified repatriation remains aspirational, especially given the current conditions in Myanmar and the lack of third-country resettlement options, India can still play a valuable role in supporting Rohingya refugees’ basic needs and rights in the interim. Admittedly, New Delhi’s recent stance toward Rohingyas has been marked by security concerns and inflammatory rhetoric, making a policy shift challenging. However, even modest humanitarian engagement, including delinking from domestic resettlement, could help India reframe its image from a securitized actor to a constructive regional partner. India could step up by offering targeted medical aid, education support, and logistical assistance in Cox’s Bazar through multilateral platforms, and aid efforts for safe, voluntary, and dignified repatriation. Such an approach would not only allow India to reframe its security-oriented handling of the Rohingya issue, but will also reinforce its criticality to Bangladesh as a values-driven, people-centric alternative to China’s model.
Nepal’s Tibetans Reel At the Mercy of Beijing
The massive 83 percent cut in USAID funding also risks projects worth nearly USD $700 million in Nepal, disrupting healthcare, education, agriculture, and infrastructure development. So far, projects worth over USD $300 million have already been terminated, while the strategically crucial Millennium Challenge Corporation (MCC) compact is threatened.
The suspension of USAID funding in Nepal has had especially significant consequences for Tibetan refugees and the wider Himalayan region. U.S.-funded programs have historically provided essential humanitarian support to Tibetan exiles. From the 1950s to the 1970s, the United States provided covert support to Tibetan resistance fighters, allocating around USD $1.7 million annually for their training and provision of supplies. In the following decades, this assistance transitioned to non-military humanitarian aid, focusing on education and cultural preservation for Tibetan exiles. However, with aid now halted and Nepal’s resources stretched thin, critical healthcare, education, and civil society initiatives have been disrupted, leaving Tibetan refugees increasingly vulnerable.
Amid waning U.S. engagement, China’s influence in Nepal has expanded, leaving Tibetans in the country further threatened. In recent times, Beijing has used its ties with Nepal’s ruling communist factions to push for restrictions on Tibetan political and cultural activities. Accordingly, under agreements with Beijing, Nepal has increased surveillance and strengthened border controls, effectively undermining the informal Gentleman’s Agreement with India and other international stakeholders that once allowed safe passage for Tibetans fleeing persecution. According to the International Campaign for Tibet, this agreement, though unofficial, had enabled thousands of Tibetan refugees to transit through Nepal and seek asylum in India, where they could access education, cultural preservation efforts, and humanitarian support. Its erosion has significantly curtailed refugee mobility and exposed Tibetans in Nepal to heightened risks of repatriation and marginalization.
As in the case of the Rohingya crisis, these dynamics create space for New Delhi to position itself as a more reliable humanitarian partner for Kathmandu. India has offered long-term but limited support for Tibetan settlements since 1959, though refugees face citizenship barriers. India should now reinforce its role as a humanitarian leader by expanding legal protections and access to citizenship pathways for Tibetan refugees, ensuring their long-term safety and security.
New Delhi could also increase support for Tibetan educational, cultural, and healthcare institutions to preserve their identity in exile. Additionally, India can use diplomatic channels to advocate for safe transit and asylum policies in the region, reaffirming its commitment to human rights and moral leadership in the region.
While admittedly, India’s capacity to host refugees is constrained by a range of domestic pressures—including bureaucratic loopholes, limited land availability in settlement areas, strain on public services—there are concerns among local populations over competition for jobs, housing, and limited funding for welfare schemes. However, such actions are worth considering as they would also allow India to maintain influence in the Himalayan region, reinforcing its stance against Chinese aggression, and strengthening ties with the Tibetan community— an enduring soft power asset.
India’s Opportunity for Humanitarian Leadership
With the United States having significantly reduced or frozen its development assistance programs in South Asia, health, education, food security, democratic governance, and refugee support have been impacted. U.S. aid was more than just financial for South Asia; it carried normative power, promoting democratic institutions, civil society, and human rights.
Washington’s withdrawal has left a vacuum in both material and moral leadership, creating uncertainty in aid-dependent sectors, disrupting local employment, and weakening democracy. Critically, it has disrupted the multipolar balance in the region. For countries historically balancing China’s influence with Western support, U.S. retreat has meant fewer choices and more pressure to turn to Beijing. As China takes up a growing role, it has blurred the line between aid and influence as it uses its weight to fulfill political goals, whether in terms of shaping Bangladesh’s democratic transition or Nepal’s policy toward Tibetans.
To provide an alternative to China in the region, New Delhi should avoid mimicking Beijing’s transactional aid diplomacy and instead foreground genuine humanitarian assistance. Unlike Western assistance, Chinese aid has often arrived only in the form of commercial or semi-concessional loans. Additionally, Beijing has at times imposed political conditions in return for aid or investment. For example, reports suggest that China has applied pressure to ensure that the Rohingyas’ return to Myanmar is expedited, despite the fact that United Nations observers believe that they would still not be safe there. In Nepal, Beijing has been criticized for using disaster aid and police training as leverage to push Kathmandu to intensify surveillance on Tibetan communities. Therefore, while China frames its interventions as mutually beneficial cooperation among Global South countries, its growing record of combining aid with geopolitical leverage erodes the credibility of that claim. Instead, India’s objective should be to offer a humanitarian model that uplifts and empowers rather than entraps its partners.
New Delhi should avoid mimicking Beijing’s transactional aid diplomacy and instead foreground genuine humanitarian assistance
To do this, India should leverage platforms such as the South Asian Association for Regional Cooperation (SAARC) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) to develop collaborative disaster response, healthcare, and democratic capacity-building initiatives. For example, India could transform the temporary SAARC COVID-19 Emergency Fund into a permanent health and disaster preparedness mechanism, and establish a BIMSTEC-led Humanitarian Assistance and Disaster Relief (HADR) center in a disaster-prone area. By pooling resources for mobile health units, telemedicine, disease surveillance, training, and joint disaster exercises, India can leverage its pharmaceutical and digital health expertise to build a cohesive regional response system that strengthens resilience and collective security. Additionally, by institutionalizing humanitarian assistance within these frameworks, New Delhi can ensure inclusivity and local ownership. This collaborative, multilateral approach could also serve as a key differentiator from Chinese aid, which relies solely on bilateral channels.
The current moment presents the perfect strategic opportunity for New Delhi to initiate this effort. U.S. aid cuts have already made their impact felt across South Asia. Concurrently, in the aftermath of the Pahalgam attack, India has undertaken a major diplomatic push to build regional and global support for its security concerns. This outreach would be well served if New Delhi placed humanitarian issues at the core of its foreign policy, reinforcing itself as a credible humanitarian partner to its neighbors.
Also Read: Nurturing Mizoram’s Role in India’s Foreign Policy: Refocusing From Security to Development
Views expressed are the author’s own and do not necessarily reflect the positions of South Asian Voices, the Stimson Center, or our supporters.
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Image 1: USAID envoy via Wikimedia Commons
Image 2: USAID truck via Wikimedia Commons
