Once again the tensed environment has been created on this region of South Asia, where India and China are fighting war of words
Chinese irrelevant strong claims on India's northeastern most province of Arunachal Pradesh & a part of Kashmir, objecting the separate visits of Indian Prime Minister, Manmohan Singh and Dalai Lama, frequent deep intrusion in the Indian territory, Sailing in the Indian Ocean near Indian territory, Supporting Pakistan, its Army and helping build them infrastructure in the disputed Indian Kashmir. Pushing opium and fake money in the Indian market, has made India to take the dialogue process seriously with China. (See: China's Yin-Yang Behaviour) India's deployment of 200 Su 30MKI in the Arunachal Pradesh was an answer but we don't want any military action.
Chinese claims on Arunachal Pradesh is totally baseless as they have neither ruled nor they ever have any communication with this part in the complete history. China claims this part belongs to Tibet which it has been controlling now, but Dalai Lama has recently mentioned clearly that Arunachal Pradesh is an integral part of India.
Daily something new we get to hear on this topic in media, but still the government of India is maintaining a soft approach towards China probably due to it doesn't want to risk the billion dollar worth bilateral trade.
What ever is happening with India, India seems to be not affected by continuous bullying by China, but can India do something to control it? China has surrounded India from all the sides (Read: Chinese String of Pearls Theory) If India won't act, China will take India soft and will either include it in its own influence and try maintain its monopoly in the region or it will crush India. If India has to do something it should have a strong economy first, strong international relations second, and good military third. Then only India can keep its stand otherwise messing with China will be like inviting punishment for India.
Steps to counter China:
1. Recognise Taiwan: India enjoys very good relations as well as trade relations with Taiwan, China claims Taiwan as its territory and Taiwanese hates China for this reason, people of Taiwan like India and believe India has the potential to do something on international forum about China and Taiwan issue in the future. India still not officially recognises Taiwan, recognising Taiwan will be a very aggressive move and can be dangerous too. So we can keep this card handy for future use.
2. Maintain Nepal: India has been pouring billions to help Nepal build infrastructure, India should also think of maintaining the relationship with Nepal specially after the formation of new government which is pro Chinese.
3. Recognition of Tibet: Again it will be a very aggressive move. Tibet was an independent country before 1951 which was later forcibly annexed by China. If China doesn't recognise Kashmir as India's part, then India has good reasons to not to recognise Tibet as China. For past four decades India has been providing shelter and market to Tibetan refugees. If China can't take care of these innocent people who are fleeing to India everyday, then China on no grounds can call Tibet as China.
4. Good relations with Nepal, Bhutan, Sri Lanka, Myanmar, Afghanistan: It is important to maintain good relations with all of the neighbours for India. Although Many of them have already fell into China's influence, it is still not too late. If India makes excellent relations with them as well, these countries will ensure that China won't use them against India. Further India should be quick to grab tenders, deals and development projects in these countries.
5. Card of Mongolia: This card can only be played when India and China will stand on the same status. Good relation with Mongolia will be necessary to setup bases and camps on the northern border of China to pressurise it from both the sides. India already enjoys good relations with Mongolia, but a little more effort is required to convert this relation into strategic.
6. Card of Central Asia: Energy rich Central Asia is needed for the growth of the country, China has already sealed many deals with these countries, India shouldn't be late to grab few deals as well.
7. Card of Japan: China and Japan relations had always been bitter. India may like to use this card when it will be strong enough to prevent any aggressive move by China. That is, having a good trade with Japan will be in India's interest. In this case, either China will force India to close ties with Japan or will start a dialogue with India to sort out the issues which is in India's interest.
8. Russia: Soviet Union always preferred India over China, but it had to maintain good relations with its communist neighbour as well. That's why Russia couldn't do much during Indo-China war in 1962. Now that such condition doesn't exist a strong Russia is needed to solve the issues if war breaks out between India and China, as Russia maintains relations with both.
9. Finally good relations with Pakistan: This one is unlikely to happen in near future. China has been developing infrastructure in Pakistan, training their army and providing them weapons and technology just to make Pakistan equal to India so that it can keep India and Pakistan busy and allow them not to grow. China and Pakistan are friends because both consider India as enemy. If India makes good relations with Pakistan. China will not find Pakistan of much use.