A newly independent India understandably did not want to become a vassal to either the US or the USSR and wanted to be friends with China. This policy was sound then, and is even sound now. Look at Manmohan Singh's recent statement "When China and India shake hands the whole world watches".
When China began to consolidate its hold on Tibet, the Dalai Lama understandably fled to India. With its liberal traditions India could hardly refuse asylum to the Dalai Lama. This was naturally seen as a threat by China. The 1962 war resulted from China's need to secure Tibet by pre-empting any Indian attack, possibly reinforced by supporters of the Dalai Lama.
Now, with Tibet secured, there is no reason for China to fight India. That both sides have nuclear weapons makes war even more unlikely. Though it makes sense for India to "keep its powder dry" by maintaining adequate military deployment, China is no threat to India.
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