India’s year of reckoning

EDITORIAL: The Financial Times’ portrayal of India’s past year as a “year of crisis” reflects a convergence of strategic, economic and diplomatic pressures that have challenged New Delhi’s long-standing self-image as a rising global power. What makes this period particularly consequential is not any single setback, but the cumulative impact of reversals across multiple fronts, exposing underlying vulnerabilities in India’s foreign policy orientation and economic management.

The military confrontation with Pakistan dealt a serious blow to India’s strategic posture. Long projected by Washington as a stabilising “net security provider” in the Indian Ocean region, the country was unable to control escalation or secure clear military and diplomatic gains during the four-day conflict. The ceasefire, brokered by external powers — the United States and China — underscored India’s constrained strategic autonomy. Rather than reinforcing New Delhi’s great power ambitions, the episode elevated Pakistan’s military-diplomatic standing and complicated India’s relations with key partners, particularly as Washington’s outreach to Islamabad became more pronounced in the aftermath.

Economically, the year reinforced concerns about India’s resilience amid growing global uncertainty. The repeated postponement and eventual stalling of a US-India trade agreement came to symbolise unmet expectations in bilateral relations. Initial optimism following high-level political engagement with the Trump administration quickly gave way to frustration as tariff threats materialised, placing additional pressure on Indian exports and undermining investor confidence. The depreciation of the rupee to historic lows against the US dollar compounded these challenges. Domestic factors, including the uneven and disruptive impact of GST reforms, further constrained growth at a time when policy clarity and consistency were most needed. On the diplomatic front, the past year highlighted India’s difficulty in balancing relations among competing global powers. While the Modi government continued to seek closer alignment with Washington, this has yet to translate into tangible economic or strategic dividends. At the same time, efforts to recalibrate ties with China remain tentative. The resumption of high-level engagement after years of tension reflects a pragmatic recognition of mutual interests; yet deep mistrust persists, limiting the scope for meaningful cooperation. Relations with neighbouring countries have also come under strain, with developments in Bangladesh adding another layer of regional complexity.

Taken together, these trends suggest that India’s challenges stem less from temporary misfortune than from strategic overreach combined with policy rigidity. The gap between ambition and capacity has become increasingly visible, particularly in the aftermath of the four-day conflict with Pakistan. Whether New Delhi can convert this difficult year into an opportunity for strategic adjustment remains the key question going forward.

Copyright Business Recorder, 2026