2025 was arguably India’s most challenging foreign policy year. The four-day conflict with Pakistan in May was followed by a downturn in India–US relations. The Trump administration imposed 50 per cent tariffs on India over its purchase of Russian crude and the failure to secure a trade deal by the agreed deadline. Adding insult to injury, Washington increased its outreach to Islamabad. There was also instability in India’s neighbourhood, including the so-called Gen Z protests in Nepal and a downturn in relations with Bangladesh after Sheikh Hasina was removed from power and fled to India in 2024.

The Modi government sought to downplay these setbacks by pointing to successes on the domestic front, including electoral successes for Prime Minister Narendra Modi’s Bharatiya Janata Party in state elections, economic reforms – including reforms to its goods and services tax and new labour codes – and free trade deals with the UK, Oman and New Zealand. Despite the challenges of US tariffs, India remained the world’s fastest growing major economy, recording 8.2 per cent growth between July and September thanks in part to its large domestic market.

However, in 2026 the lines between foreign policy, domestic politics and the economy are likely to become increasingly blurred. The latest GDP growth data was before the full force of Trump’s tariffs came into effect, so they will begin to have a more sustained impact on the economy the longer they remain in place. Washington is also considering additional sanctions on countries doing business with Russia. This economic impact could have a knock-on effect on the country’s politics as India will hold elections in four states and one Union Territory in 2026.

The Modi government will be hoping that trade diversion efforts help alleviate some of these pressures. A key watchpoint will be the conclusion of a trade deal with the European Union, India’s leading trade partner. However, the negotiations have been on and off since 2007 and a deadline to conclude a trade deal by the end of last year was missed. Both sides will be seeking to conclude the deal ahead of European Commission President Ursula von der Leyen’s visit to India later this month.

Summit year

India will host a string of summits in 2026, including the AI Impact Summit in February, the BRICS summit and possibly the Quad summit, which was scheduled to take place last year but postponed amid the downturn in India–US relations. India will also be hosting several key world leaders. Following Russian President Vladimir Putin’s visit to India in December, Ursula Von der Leyen and European Council President António Costa will be chief guests at India’s Republic Day parade later this month. Chinese President Xi Jinping may visit India for the BRICS summit, and US President Donald Trump could visit India if the Quad summit goes ahead – and New Delhi and Washington are able to resolve their differences and secure a trade deal.

While New Delhi will argue these developments vindicate its multi-aligned foreign policy, the cracks in India’s longstanding commitment to strategic autonomy are becoming increasingly difficult to ignore. India’s exclusion from the inaugural summit of the Trump administration’s Pax Silica initiative in December was telling. India has long been touted as a beneficiary of the push to de-risk or diversify supply chains away from China but its exclusion from a key initiative on critical and emerging technologies signalled a weakening of this narrative.

India’s absence from the Pax Silica summit partially reflects the bad blood in the India–US relationship and Washington’s aversion to the vagaries of India’s strategic autonomy as it prefers to do business with more reliable partners. But it also shows that India is increasingly viewed as a secondary player in the development of critical and emerging technologies. Although US tech companies like Google, Amazon and Microsoft have announced investment commitments in India, much of this is in data centres.

This points to several structural challenges facing India in its ambition to become a global manufacturing hub. An example of this can be seen in the semiconductor space. India is an important player in terms of chip design and last year Modi announced that India would deliver its first domestically produced chips. However, this will largely focus on less advanced (trailing-edge) chips. Chip production also requires water and electricity – areas where India faces acute shortages.

Strategic autonomy under increasing scrutiny

India’s careful international balancing act was clear in its response to the US attack on Venezuela. Among BRICS members, India was the least vocal in its response to the attack and the capture of President Nicolás Maduro. Its Ministry of External Affairs issued a brief statement that expressed ‘deep concern’ about recent developments, while the government’s main focus has been to support and safeguard Indian nationals in Venezuela.

India’s muted response partially reflects its limited interests in Venezuela; India has reduced its import of Venezuelan crude in response to Western sanctions on the country. It also reflects a desire to stay on good terms with Washington and secure a trade deal. This echoes New Delhi’s muted response to other global flashpoints, including the conflicts in Gaza (to stay on good terms with Israel) and Ukraine (to stay on good terms with Russia).

As a result, Indian foreign policy can often come across as aloof. It professes a commitment to the rules-based international order, including principles of sovereignty, territorial integrity and the equality of states, but it is often quiet when it comes to upholding these principles. India claims to be a ‘voice’ of the Global South, but when Venezuela is attacked, its response is slow and silent.