Not sure what China can do to be honest. Indian nationalism thrives on Hindutva ideology. And the percentage of moslems in India is too small. Some islamists fantasise that you can combine all moslems in South Asia into one bloc, but that ignores regional and linguistic differences (see Bangladesh war of liberation).China biggest foreign policy blunder will be to not spending massive money to destabilize, degrade and eventually break up India. They are letting India go easy. They still think they can convince India not to join an anti-China alliance. Instead they should be focusing on taking India out of the equation completely.
Moreover, if India were to de-stabilise, the risk of nuclear war goes up exponentially. I think it would be better to stymie India's rise rather than seek to break it up. But even there, it's not clear what China can do. India's economic model is mostly based on services exports to the West. I think this push to manufacturing is probably the best bet where China can have some leverage. But it appears the CCP boomers are big believers in Global South ideology.