India’s Foreign Policy in 2025: A Year of Shocks, Setbacks, and Strategic Recalibration

For India’s foreign policy establishment, 2025 unfolded less as a year of steady diplomacy and more as a succession of shocks. From a disruptive return of Donald Trump to the White House, to turbulence in India’s neighbourhood and prolonged global conflicts, New Delhi found many of its assumptions tested. As South Block looks ahead to 2026, the question is no longer just about managing crises, but about recalibrating expectations in an increasingly volatile world.

The Trump Factor: The Biggest External Jolt

There is little dispute that the single most consequential global development for India in 2025 was the return of Donald Trump as President of the United States. His second term quickly dismantled assumptions in New Delhi that Washington would pursue a predictably pro-India line.

Trump’s “Liberation Day” tariffs destabilised the multilateral trading system and imposed direct costs on India, including steep tariffs and surcharges linked to India’s purchase of Russian oil. His altered stance on Russia and China unsettled US alliances in Europe and the Indo-Pacific, complicating India’s own strategic balancing act.

Equally damaging was Trump’s personalised and erratic diplomacy — from claims of brokering peace during Operation Sindoor to hosting Pakistani leaders at the White House and approving F-16 supplies. These moves undercut India’s long-standing campaign to isolate Pakistan on cross-border terrorism.

Protectionism, Populism and a Slowing Global Economy

Beyond Washington, global political trends also turned adverse. The rise of ultra-right and nationalist forces — from European Parliament elections to leadership shifts in Japan and Chile — reinforced a conservative, inward-looking mood worldwide.

At the same time, global growth projections softened, with the world economy expected to slow from 3.3% in 2024 to 3.1% by 2026. A glut-driven fall in oil prices, while easing inflationary pressures, raised concerns about weakening momentum behind renewable energy transitions — a long-term worry for climate diplomacy.

Wars That Would Not End — and Their Cost to India

The war in Ukraine entered its fourth year, but 2025 marked the first time India faced direct economic consequences. Sanctions by the EU and the U.K. on Nayara Energy — an Indian-Russian joint venture — and US sanctions on Russian oil majors hit India’s energy calculus hard.

In West Asia, Israeli strikes on Gaza continued with devastating human costs, even as a late-year American-backed ceasefire offered limited hope. For India, the conflict stalled ambitions around the India–Middle East Economic Corridor and created diplomatic discomfort in forums such as the Shanghai Cooperation Organisation and BRICS, especially after New Delhi avoided criticism of Israeli strikes on Iran.

Turbulence in the Neighbourhood

Closer to home, the year tested India’s “Neighbourhood First” policy. Conflict with Pakistan, Gen Z-led protests toppling the government in Nepal, and anti-India violence in Bangladesh following the killing of a right-wing leader all raised questions about India’s regional influence.

These developments highlighted how fragile political transitions in neighbouring countries can quickly acquire an anti-India edge, especially when domestic unrest intersects with nationalism.

Why the Trump Challenge Cut Deepest

The difficulty with Trump lay not only in policy outcomes but in shattered expectations. India faced criticism at home over deportations of undocumented migrants, tighter H-1B and student visa regimes, and the perception that diplomacy failed to prevent US-Pakistan re-engagement.

External Affairs Minister S. Jaishankar, despite multiple visits to Washington, faced rare domestic scrutiny as India–US ties visibly cooled. Strains also emerged with Turkiye, Azerbaijan and Malaysia, seen as tilting toward Pakistan during India’s conflict.

Diplomatic Bright Spots Amid the Gloom

Yet 2025 was not without successes. One notable turnaround came with Canada. After two years of strained ties over allegations linked to a Khalistani separatist killing, Prime Minister Narendra Modi met the new Canadian leader Mark Carney at the G-7 outreach, agreeing to stabilise relations.

India also made a calculated diplomatic bet on Afghanistan, engaging the Taliban government despite international discomfort. The visit of Taliban Foreign Minister Amir Khan Muttaqi to Delhi, hosted with full honours, signalled India’s willingness to prioritise strategic presence over ideological distance — even as critics questioned engagement with a regime hostile to women’s rights.

Managing China Without Normalising Tensions

With China, New Delhi continued the cautious rapprochement begun in late 2024. Steps such as reopening the Kailash-Mansarovar pilgrimage, restoring visas and flights, and resuming water-data sharing helped stabilise ties.

This engagement persisted despite China’s strong backing of Pakistan during Operation Sindoor. Visits by Modi, Jaishankar and National Security Adviser Ajit Doval to China for SCO meetings reflected India’s decision to keep channels open even amid deep mistrust.

Strengthening Select Neighbourhood Partnerships

Although some neighbours drifted, India reinforced ties with Bhutan, Sri Lanka and the Maldives. Assistance to Sri Lanka after Cyclone Ditwah — including $450 million in aid — earned widespread goodwill and demonstrated India’s role as a first responder in the region.

What 2026 Holds for South Block

As 2026 begins, much of India’s diplomatic effort will centre on trade. Bilateral agreements with the U.K., Oman and New Zealand are done, but larger deals with the US, EU, ASEAN, GCC and others remain pending. Early 2026 could see breakthroughs, especially if the India-EU free trade agreement is finalised during the Republic Day visit of European leaders.

India will also watch elections in Myanmar, Bangladesh and Nepal closely, each with implications for regional stability. Hosting the Artificial Intelligence Summit in February and a possible visit by Trump for the Quad Summit will test India’s convening power.

Later in the year, BRICS and G-20 summits — potentially involving Vladimir Putin, Xi Jinping and Trump — will place India amid high-stakes global diplomacy once again.

A More Tempered Foreign Policy Moment

After a year defined by surprise and disruption, Indian foreign policy enters 2026 with fewer illusions. The experience of 2025 suggests that ambition must be matched by realism, and strategic autonomy by sharper prioritisation.

For South Block, the challenge ahead is not merely to respond to shocks, but to build resilience — in trade, neighbourhood diplomacy and global partnerships — in a world where even long-standing assumptions can no longer be taken for granted.