Indian defence planners have long recognised the growing potential of the Andamans as a strategic base. It is close to the important sea-lanes that take vast amounts of oil to East Asia through the Malacca Straits and the South-east Asian countries and is only around 45 km from the Myanmarese Cocos Islands where the Chinese have a presence.
India (Andamans in Bay of Bengal on right of map)
Andaman & Nicobar Islands (arrow to Car Nicobar): (update red star is Coco Island belonging to Myanmar)
"...only around 45 km from the Myanmarese Cocos Islands where the Chinese have a presence."
Sea lanes! See this. Note that the Andamans and Nicobar Islands are virtually at the western entrance to the Malacca Strait.
Update: Chinese presence on Coco Islands:
The maritime reconnaissance and electronic intelligence station on Great Coco Island in the Bay of Bengal, some 300 kms south of the Burmese mainland, is the most important Chinese electronic intelligence installation in Myanmar [Burma]. The Chinese Army is also building a base on Small Coco Island in the Alexandra Channel between the Indian Ocean and the Andaman Sea north of India's Andaman Islands. These two islands, which have been leased to China since 1994, are located at a crucial point in traffic routes between the Bay of Bengal and the Strait of Malacca. The Coco Islands are thus an ideal location for for monitoring Indian naval and missile launch facilities in Andaman and Nicobar Islands to the south and movements of the Indian Navy and other navies throughout the eastern Indian Ocean.(source)
Construction of the Great Coco Island station began in late 1992 with the emplacement of a 45-50m antenna tower, radar sites and other electronic facilities forming a comprehensive SIGINT collection facility. In mid-1993, some of the 70 Chinese naval personnel began operating the new radar equipment, and by the summer of 1994 the the PLA the radar and SIGINT facilities were complete and ready for use.
Update2: Interesting backgrounder on the Indian base (partially paid for by US funding) here.