LONDON — India and Bangladesh have reportedly agreed in principle to swap each other’s enclaves that are spread along the border areas and re-demarcate 6.1 kilometers of boundary — in effect resolving an issue that has bedeviled Indo-Bangladesh ties since independence.

This is an historic move that could transform New Delhi’s relations with Dhaka perhaps forever. In recent months, India has made some significant overtures in its immediate neighborhood.

The Indian government has appointed, Shyam Saran, a former foreign secretary, as a special envoy to Nepal in an effort to end the political logjam in the Himalayan kingdom over the election of a new prime minister. The political parties in Nepal have not been able to reconcile their differences and, as a result, the writing of a constitution and the larger peace process remain in the doldrums. India has finally realized that it cannot remain nonchalant about the political drift in Kathmandu.

Indian Finance Minister Pranab Mukherjee made a whirlwind trip to Dhaka last month to mark the signing of a $1 billion loan deal, the largest line of credit received by Bangladesh under a single agreement. India’s Exim Bank has signed this line-of-credit agreement with Bangladesh’s economic relations division. The loan will be used to develop railways and communications infrastructure in Bangladesh. The deal carries a 1.75 percent annual interest rate and is to be repaid in 20 years with a five-year grace period.

Mukherjee’s was the first high-profile Indian political visit to Bangladesh after Bangladesh Prime Minister Sheikh Hasina’s trip to New Delhi in January. Bangladesh has been rightly upset at the slow pace of implementing deals signed during Hasina’s visit.

Sheikh Hasina has taken great political risk in putting momentum back into Delhi-Dhaka ties. But there has been no serious attempt on India’s part to settle outstanding issues. Bureaucratic inertia and lack of political will has prevented follow-through on many the deals.

Dhaka is seeking an expeditious Indian response to its demand for the removal of tariff and nontariff barriers from Bangladeshi products. There has also been little movement on the boundary issue and on transit rights.

India has failed to reciprocate fully to Hasina’s overtures. It’s this lackadaisical Indian attitude toward its neighbors that has shifted New Delhi to the strategic margins of its own neighborhood and allowed Beijing to fill the void.

China’s rising profile in South Asia is no news. What is astonishing is the diminishing role of India and the rapidity with which New Delhi is ceding strategic space to Beijing on the subcontinent.

Pakistan’s “all-weather” friendship with China is well-known, but the reach of China in other South Asian states has been extraordinary. For their part, Bangladesh and Sri Lanka view India as more interested in creating barriers against their exports than in spurring regional economic integration.

India’s protectionist tendencies have allowed China to don the mantle of regional economic leader as China has become the largest trade partner of most states in South Asia, including India.

Earlier this year, China increased its annual aid to Nepal by 50 percent to about $22 million and is now the largest aid donor to Sri Lanka. Consequently, instead of India emerging as the facilitator of socio-economic development in Sri Lanka and Nepal, it is China’s developmental assistance that might end up having a greater impact in the region.

India’s structural dominance in South Asia makes it a natural target of resentment among its smaller neighbors. Its looming presence creates the unique paradox in which the core regional power itself is seen as constituting a security threat. There are major disputes within the region and somehow India seems to occupy center stage.

Most states have bilateral disputes with India. Bangladesh remains concerned about India exploiting its geographical position to redirect water flows, while India’s control over transit links makes Nepal and Bhutan susceptible to pressure from New Delhi. These disputes have led to a climate of political animosity and suspicion that has resulted in limited cooperation.

India is far ahead of all the South Asian states in economic power, military might and global influence. This makes other small states in the region apprehensive of India’s intentions. While they recognize the importance of India in facilitating faster economic growth in the region, they are reluctant to work with India for fear that India will use regional organizations like the South Asian Association for Regional Cooperation to further its “hegemonic ambitions.”

Instability in Pakistan, Afghanistan, Nepal, Sri Lanka and Myanmar is a major inhibiting factor in India’s efforts to realize its dream of becoming a major global player. India is surrounded by several weak states that view New Delhi’s status in the region with suspicion.

The structural position of India in the region makes it highly likely that Indian predominance will continue to be resented by its smaller neighbors, even as instability nearby continues to have the potential of upsetting its own delicate political balance.

A policy of “splendid isolation” is not an option, and India’s desire to emerge as a major global player will remain just that — unless it engages its immediate neighborhood more meaningfully. That involves a proactive diplomatic posture that takes the concerns of smaller neighbors seriously and a political generosity that allows them an opportunity to share the benefits of India’s economic rise.

So, with regard to Bangladesh at least, it is heartening to see New Delhi finally realizing that it needs to take its immediate neighborhood more seriously.

Harsh V. Pant teaches at King’s College London.

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