India and China have a bunch of border disputes plus they built a dam on a river that flows through India and Bangladesh in defiance of the protests of the Indian government. And China likes to dictate terms in these disputes, as seen in the OP. I just don't know if they have the strength to dictate terms to everyone everywhere. Not to mention even strong nations need friends.
India and China are almost destined to end up on opposite sides - for one thing their relative sizes and proximity tend towards competition. In other words India is too big and too potentially powerful for China to simply dominate (as it very likely may come to do with the Southeast Asian countries, alas). India's interests (and presumably Japans) will be to try to involve the US in a close containment-style alliance against China. Additionally India and China's economic roles are adversarial, in a way that, say Australia or even Thailand's are not (those are complementary).
One final factor to mention is the very deep cultural divide which separates Indians from East Asians - I once attended a conference where most of the attendees were either Indian or Chinese, and the hostility between the two groups was hilarious. The Chinese would pompously (and badly) lecture away on their topics, almost reading their papers aloud, and then react in utter shock when the Indians in the audience disputed every little thing they said, in real argumentative style. They'd obviously no experience with such questioning. I enjoyed watching the Indians poke at the fuming Chinese with little smirks on their faces, waggling their heads from side to side.
Interestingly most Southeast Asians despise Indians, while they admire Chinese.. the reasons are probably due mainly to this cultural gulf. Thais constantly harp on their prejudice that Indians 'smell bad' (meaning B.O.), but never mention the horrific bad breath from the Chinese quarter (which to my mind is far worse).
