Mutual antagonism persisted for decades amid periodic border skirmishes. Only in this century have the two sides begun to improve relations, with bilateral trade growing from less than $3 billion in 2000 to over $70 billion in 2011. And leaders are sticking to a $100 billion target for 2015, despite a roughly 12 percent contraction in 2012. But as China's rocky relationship with its second largest trading partner Japan shows, economic interdependence is no guarantee of friendly relations, and severe trade imbalances in China's favor have been an ongoing source of tension in India.
Numerous other friction points persist between the two nuclear powers. China frequently complains that India's offering of refuge to both the Dalai Lama and the headquarters of the exiled Tibetan government constitutes tacit support for China's territorial disintegration. And India is dismayed by Chinese plans to build a series of dams on the Brahmaputra River, which originates in Tibet but flows into India. Tens of millions depend on the river, and water competition between the two countries will likely continue to grow.
Chinese expansion into the Indian Ocean -- which India regards as its backyard -- also raises hackles in New Delhi. Indian media reported in April that a classified Defense Ministry document alleged Chinese submarines have been making routine forays into the Indian Ocean. In February, a Chinese company assumed administration of Pakistan's strategic Gwadar port, reviving fears that China is seeking a stronger foothold along India's periphery. Geostrategic competition also extends to Myanmar, where China and India have long competed for influence, and is complicated by China's friendship with India's archenemy, Pakistan.
And popular mistrust aggravates these political disputes: A 2012 poll by the Pew Research Center found that only 23 percent of both Indians and Chinese hold a "favorable" view of each other.
Now, with Chinese troops in Indian-controlled territory, it is New Delhi's move. There will be immediate diplomatic implications on the content and atmospherics of upcoming high-level visits. The Indian military will have to consider augmenting its presence and capacity at the border, as it has during previous crises. Some Indian commentators are also suggesting that Delhi re-open the question of China's legitimate rule over Tibet, which would certainly anger Beijing.
Over the last decade, India has conducted a landmark naval exercise with Japan, trained Vietnamese fighter pilots, and held increasingly sophisticated maritime exercises with Singapore. Even if diplomacy prevails and both sides find a face-saving resolution to the current standoff, the incident will likely cause India to strengthen its political and military relations with countries throughout East and Southeast Asia. Delhi should lend "a shoulder to countries such as Japan, Vietnam and even Singapore who are fearful of China's hegemonism," argues Swapan Dasgupta, a leading Indian journalist.
A rerun of the 1962 conflict is unlikely; neither country is mobilizing for war and the presence of a few dozen PLA troops does not harbor the potential for rapid escalation like the high-seas gamesmanship in the South and East China Seas. Nevertheless, if the two sides cannot reach a lasting political solution soon, competition could overwhelm the positive tenor that has defined Sino-Indian relations in recent years. There are few worse things that could happen to Asia than its two biggest giants backsliding into rivalry.
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