If Modi Govt. want to improve relation with Pakistan it can't because clapping happen with the help of both side and China is trying to disturb India but Govt can improve relation with other two.
We can see Political instability in Nepal, china is taking benefit of this situation. In past only India was import oil to Nepal but Now China can also import. China want to control Nepal through Economic way, Similarly its treat to Sri Lanka where China already invested huge amount in Sri Lanka. 
China know very well every country want healthy economy particularly small country. We can see political instability, big protests, insurgency all happened in some countries because their economy was not healthy. So economic instrument is strong weapon in foreign policy. It can be neighbours foreign or international foreign policy. 
Why not India play similarly India and China is major economy in Asia if we can see BRICS and ISBA where trillion dollars trade going on. 
If India can also invested huge amount in Sri Lanka and Nepal India can defeat china.
Now Time is to Re look Neighbors Foreign Policy.