Continuity beneath Change
India Growth Story: Resilience amid Shocks
The Indian economy stood out as a key global outperformer, anchored in a rare “Goldilocks” convergence: 8.2% GDP growth in Q2 FY26, inflation hovering low, and unemployment trends easing amid structural tailwinds. PLI and ELI schemes catalyzed manufacturing surges in electronics and pharmaceuticals, capitalizing on global value chain restructuring. Initial disruptions from steep 50% US tariffs gave way to export rebound through astute trade diversification. Shocks were buffered by labour code consolidation for flexible hiring, GST rationalization for cost efficiencies, and the Export Promotion Mission's credit lifelines. FTAs with the UK, Oman, and New Zealand reached finality, the EFTA pact operationalized to channel $100 billion in investments over 15 years, and EU negotiations advanced toward a January 2026 closure.
Wisdom of Strategic Autonomy
The US enters its 250th year as an ever more polarised nation in 2026. As the MAGA camp fractures deeper over identity faultlines, 2025 witnessed a surge in anti-Indian hate fueled by H-1B debates. Washington slapped India with its steepest tariffs, while Pakistan went back to seeking relevance through playing mercenary, hawking security services for arms deals and diplomatic cover. Sino-Indian normalization progressed on border fronts, yet China's Indo-Pacific shadow endures as a long-term threat. US-China swings between selective decoupling and recoupling laid bare strategic autonomy's enduring wisdom.
The US remains India's bedrock partner with foundational ties intact, but tides favor expanding middle-power partnerships.
AI Momentum
India positioned itself as a prime beneficiary in the accelerating AI-data center-digital infrastructure cycle, drawing billions from global tech majors. Job displacement risks remained muted here due to service-sector buffers. Amid concerns of a US AI stock bubble, some silver lining in India with potential capital pivot towards emerging markets. The strategic imperative? evolve from low-cost outsourcing to an innovation powerhouse, leveraging domestic talent pools for proprietary AI models tailored to multilingual, high-context applications.
Energy Boom: Oil Reigns Supreme
Geopolitical flux revived oil's strategic primacy, with India's import basket—led by Russian crude exceeding a third of volumes despite US tariff reprisals and sanction threats—fueling refineries and underscoring energy pragmatism and diversification. With India’s consumption trajectories projected to outpace China's, India will play an even greater role in driving global demand. Complementing this, renewables achieved a landmark single-year capacity leap in July, with solar dominating to meet over half of peak electricity needs. With energy hungry data centers on their way, India unlocked limited private nuclear participation under regulatory guardrails. This multitrack approach fortifies energy security, yet hinges on grid stability and import diversification for 2026 resilience.
Minerals Security Imperative
2025 saw mineral security becoming central to great-power competition.
China tightened its dominance through expanded export controls on rare earths and refining technologies, requiring special licenses from foreign firms to wield its market leverage strategically. India launched the National Critical Minerals Mission to build self-reliance via domestic exploration, overseas acquisitions, processing incentives, and R&D—success turning on scaled-up domestic refining capacity.
Neighborhood Pressures Persist
As global winds shifted, the neighborhood stayed stubbornly familiar. Geographical and historical realities continue driving India's ties with smaller subcontinental states: terrorism, violence, and instability from and in Pakistan and Bangladesh remained flashpoints. Operation Sindoor saw India establish decisive military dominance through precision strikes over five days, corroborated by released high-res imagery and ground footage. In Sindoor's shadow, 2025 marked accelerated indigenization: drones, counter-UAS systems, electronic warfare suites, autonomous vessels, and precision munitions advanced rapidly. PM Modi's "new normal" doctrine equated terrorists with their backers in Rawalpindi. Afghanistan saw a significant diplomatic reset, with India upgrading its Kabul mission to full embassy status and hosting Foreign Minister Muttaqi—signaling deeper engagement on trade, infrastructure, and counter-terrorism.
Climate Extremes Intensify
India endured extreme weather on over 99% of days from January to November 2025, amplifying heatwaves, erratic monsoons, and air quality crises that slashed agricultural output, strained food security alongside rural economies, and unleashed an urban health menace from toxic air. These shocks highlight climate as a structural drag, demanding resilient farming, expanded insurance, urgent air quality interventions, and hardened infrastructure heading into 2026.
