India’s Year in Review — 2025 Strategic & Economic Trends

A year-end assessment of India’s trajectory in 2025, as highlighted by the Financial Times, presents a picture of a country navigating heightened security challenges, economic adjustments, and complex global partnerships, all of which will significantly influence policy choices in 2026.

Security & Foreign Policy: A Sharper Edge

One of the defining moments of 2025 was the terror attack in Kashmir, followed by Indian cross-border military strikes, reinforcing New Delhi’s doctrine of deterrence and calibrated retaliation. The episode underlined India’s willingness to respond decisively to security threats while managing escalation risks in a volatile regional environment. These actions shaped India’s diplomatic messaging, especially toward neighbouring countries and major powers concerned with South Asian stability.

India–US Relations: Strategic Yet Strained

Despite a strong strategic partnership, India–US trade negotiations faced friction over tariffs, market access, and industrial policy. Disagreements reflected broader global trends of protectionism and supply-chain re-shoring. While defence and technology cooperation continued, economic negotiations highlighted the limits of alignment between strategic partners with divergent domestic priorities.

Economic Signals: Mixed but Resilient

Economically, rupee depreciation emerged as a challenge amid global financial tightening and volatile capital flows. However, India’s fundamentals remained comparatively resilient. A major bright spot was the electronics Production-Linked Incentive (PLI) scheme, which delivered strong export growth, manufacturing expansion, and deeper integration into global value chains.

Reforms & Policy Recalibration

Rather than sweeping reforms, 2025 saw a recalibration of economic policy—focusing on targeted incentives, fiscal prudence, and infrastructure-led growth. This approach reflects lessons from global uncertainty and domestic political economy constraints.

Looking Ahead to 2026

Together, these trends suggest India entering 2026 with greater strategic confidence, but also with pressing tasks: managing external economic shocks, strengthening manufacturing competitiveness, and balancing security imperatives with diplomatic stability. The year reinforced India’s role as a major but cautious power, adapting pragmatically to a fragmented global order.