Reaffirming India's commitment to maintain its "good relationship" with China, Mr Madhav said New Delhi handled the Doklam dispute with maturity -- using its foreign policy clout and hard posturing on the ground.
"Here we deployed mature diplomacy together with strong ground posturing. But having said that, Doklam is not over," he said.
The remarks assume significance in the wake of reports that China has started building up its military forces near the Doklam plateau which was at the centre of a protracted stand-off early this year between the militaries of the two countries.
Mr Madhav didn't discuss the issue further given "the constraints", he said, he faced as a BJP leader.
"Our foreign policy is largely driven by romantic ideas. Since I am a member of the ruling party I cannot say much about it. But I am a firm believer that romanticism should end," Mr Madhav said, addressing a gathering at the ML Sondhi Memorial Lecture in New Delhi.
He said while India had created its neighbourhood it had not learnt how to live with them.
"We have created neighbours, we also should have learnt to live with them. The history of the last five decades suggests probably we have not learnt to live with them. To learn to live with your neighbour, you should know who he is," said Mr Madhav, a known expert in the BJP on matters related to China.
He said China was an important neighbour to India as "the obsession of the common man in India" was shifting from India-Pakistan ties to India-China relationship.
"The obsession today is China. Maintaining good relationship with an important neighbour like China is definitely a matter of priority for the government. I have a hope in this relationship because Chinese President Xi Jinping and Prime Minister Narendra Modi are strong leaders with firm commitments and fortunately both enjoy personal goodwill and good rapport."
He said the Tibet issue needed a "pragmatic" approach that honours both India's commitment to China as on its status and Tibetans as "honored guests" in the country.
"As a nation, we have given commitment to China about its status. We should have a pragmatic policy (on Tibet)," Mr Madhav said.
Head of the Tibetan government-in-exile Lobsang Sangay, who delivered the lecture, said India should treat Tibet as a "core issue" and expressed his concerns over growing Chinese influence in India's neighbourhood.
The chief of the Central Tibetan Administration (CTA) said Tibet held the "key" to Beijing in many ways and can also be a "potential catalyst" to bring about changes inside China.
"India should declare Tibet as one of the core issues like China. It should make it part of the formal dialogue agenda. Had India taken a stand in 1950s and 60s (things would have been different)," he said.
He said Tibetans should be granted the lost "guardianship" of the Tibetan plateau, which was "necessary".
They should have a say on the usage of water of rivers located in the Tibetan plateau, he said, referring to reports of highly-polluted water from Brahmaputra's tributary flowing into India.
This, he said, indicated that the Chinese may be building dams somewhere in Tibet.
Arunachal Pradesh Chief Minister Pema Khandu and Assam Chief Minister Sarbananda Sonowal have drawn the attention of the Centre on the river contamination which is believed to have been caused due to activities on the Chinese side.