Fifty years ago India tasted bitter defeat at the hands of China in a brief border war, and the memory still spooks New Delhi's leaders as they try to compete with their powerful Asian neighbour.

In 1962, badly-equipped Indian troops were humiliated in the four-week battle over the Himalayan frontier, with Chinese forces pouring through the mountains and advancing as far as the plains of Assam.

China then withdrew to the current border but it still claims much of the remote Indian state of Arunachal Pradesh, and the dispute consistently sours efforts to improve ties between the regional rivals.

In the last 20 years, both countries have experienced rapid development but China's faster economic growth and its emergence as a world power has only underlined India's misgivings over the war that began in October 1962.

"There is no doubt that the war still plays a key role in defining our diplomatic ties with China," said Sreeram Chaulia, head of the Jindal School of International Affairs near New Delhi.

"A sense of insecurity dominates the equation. India will never forget the war, nor can it forgive China for advancing so far into its territory."

The border between India and China has been the subject of 14 rounds of fruitless talks since the war and, despite warm words during official visits, friction remains high on the border itself.

Indian army officials say troops deployed by both countries hoist national flags near the border, and even throw cigarette butts into the disputed zone, to express their claims over the territory.

"Fifty years after its worst military debacle, India is still playing catch up. China is way ahead of India in the security and economic spheres," G. Parthasarthy, a retired army officer and former diplomat in New Delhi, told AFP.

"We still cannot match their prowess and the border talks yield no significant results. They just keep the issue brewing."

In their last major disagreement, China protested angrily during the Indian 2009 election campaign when Prime Minister Manmohan Singh visited Arunachal Pradesh, which China marks on maps as a part of its Tibet region.

Both sides accuse each other of reinforcing the military presence in the area, with India now deploying about 20,000 soldiers and also building roads and an airfield to improve its transport and logistic links.

As India and China focus on maintaining economic growth, another outbreak of fighting appears unlikely and last month they decided to resume joint military exercises in an outward sign of improving ties.

"We have reached the very important consensus of further promoting the friendly, strategic partnership," China's Defence Minister Liang Guanglie said after meeting his Indian counterpart A.K Antony last month.

On the economic front, India in August invited China to invest in its new flagship manufacturing zones as part of a push to broaden commercial relations and cut a ballooning trade deficit.

India's trade deficit with China soared 42 percent to nearly $40 billion in the last fiscal year, while total bilateral trade climbed 27 percent to $75 billion.

Some analysts say the rivalry once fought in the Himalayas is now a proxy war in smaller regional countries as China tries to increase its influence in Pakistan, Nepal, Myanmar and Sri Lanka.

China is helping India's arch-rival Pakistan in key strategic projects and some western countries are concerned about its plan to help Islamabad build more nuclear power plants.

"Earlier they fought over a small territory, now they are fighting for regional dominance," said Nani Gopal Mahanta, a political science professor in the northeast state of Assam.

"India and China may declare their long-standing brotherhood but the fact is their relation is shrouded in darkness."

A recent survey by the Washington-based Pew Research Center showed an overwhelming majority of Chinese are wary of India's growth, with 62 percent admitting they have a negative opinion of India. Just 23 per cent said they saw India favourably.

For India, where confidence in the country's economic prospects has recently faltered, the reality that China is racing further ahead as the dominant force in the region only fuels suspicion.

"As both nations grow and develop, our greatest challenge is how India learns to live with China," The Times of India said in an editorial to mark 50 years since the war.

"We fear China, we envy China, we don't want to be China but we want to be as efficient as China."