India’s Diplomatic Headwinds: 2026

The defining spirit of Indian foreign policy in 2025 was one of shock and surprise as the government faced multiple unexpected international challenges from different directions during the year.

The Trump Factor- U.S. Ties & “America First” Impact

• Return of Donald Trump: He was sworn in as U.S. President for a second term in January. This event became the most significant foreign policy story for India in 2025.
• Disruption of Multilateral Order: USA’s Liberation Day tariffs rocked the multilateral economic system. These measures destabilised the existing world order.
• Shift in Strategic Priorities: Trump altered U.S. policies toward Russia and China, which had earlier been labelled the biggest threats to America. This rattled America’s closest alliances in Europe and the Indo-Pacific.
• Diplomatic Conduct: Trump lowered global discourse through his high-handed treatment of world leaders. At the same time, he demanded excessive flattery while claiming he had ended eight wars to win a Nobel Prize.

Impact on India–U.S. Relations

• Tariffs: The USA imposed a 25% tariff and an additional 25% surcharge on India for buying Russian oil.
• Immigration and Visa Policies: The U.S. crackdown on immigration included H-1B visas, student visas, and the deportation of Indian illegal immigrants. 
• Pakistan-Related Actions: Mr Trump repeatedly claimed that he mediated the ceasefire of Operation Sindoor. He hosted Pakistani leadership at the White House and approved the delivery of F-16s to Pakistan.
• Diplomatic Fallout: These actions damaged India’s campaign against cross-border terrorism from Pakistan. 
  • They also led to strains with Turkiye, Azerbaijan and Malaysia, which were perceived as supporting Pakistan.

Global Trends- Right-Wing Politics & the Oil Paradox

• Rise of the Ultra-Right: Ultra-right politicians gained ground globally, including in European Parliament elections, Japan and Chile. This signalled a growing conservative and xenophobic trend.
• Oil Price Decline: Oil prices fell amid a production glut by OPEC countries. This raised concerns for the renewable energy push to combat climate change.
• Global Growth Outlook: Global growth was projected to slow from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026. This can lead to lower demand for India’s exports.
• Russia–Ukraine War: The Russia–Ukraine war entered its fourth year.
• Economic Impact on India: For the first time, India faced severe economic consequences for buying Russian oil. 
  • The EU and the UK imposed sanctions on the Indian–Russian joint venture Nayara Energy. 
  • The U.S. imposed sanctions on Russian oil majors, making it more difficult to buy cheap oil.

West Asia Crisis

• Gaza Conflict: Israeli strikes on Gaza continued throughout the year. Over 70,000 people, including 20,000 children, were killed.
• Ceasefire Developments: An American-backed ceasefire deal at the end of the year offered some hope.
• Economic Loss: India’s plans for the India–Middle East Economic Corridor (IMEC) came to a standstill.
• Diplomatic Challenges: India’s refusal to criticise Israel for strikes on Iran in June led to awkward moments at the SCO (Shanghai Cooperation Organisation) and BRICS. 
  • Iran is a member of both groupings.

Neighbourhood Crisis- The “Ring of Fire”

• Pakistan: India conducted Operation Sindoor in response to a major terror attack in Pahalgam, Kashmir, in April 2025. The attack targeted civilians, resulting in significant casualties.
• Nepal: Gen-Z protests toppled the government, leading to instability at the open border.
• Bangladesh: Mob violence erupted after the killing of a right-wing leader. The violence turned anti-India in nature.
• Neighbourhood First Questioned: These developments raised questions over the effectiveness of India’s “Neighbourhood First” policy.
  • India faced a “two-front” diplomatic challenge, as instability in the neighbourhood drove up internal security costs.

Strategic Wins Of India

• Reset with Canada: India achieved a turnaround in relations with Canada after tensions since 2023. The tensions arose over allegations that India oversaw the assassination of a Khalistani separatist.
  • Prime Minister Modi visited Canada to attend the G-7 outreach and agreed with the new Canadian Prime Minister, Mark Carney, to set aside their differences.
• Engagement with the Taliban: India engaged with the Taliban, which had taken Kabul by force in 2021. 
  • Relations improved after a meeting between the Indian Foreign Secretary and the Taliban Foreign Minister, Amir Khan Muttaqi.  
  • The worsening Afghan-Pakistan ties and their conflict worked in India’s favour, as Pakistan had to deal with a “two-front” problem—something India usually faces with China and Pakistan.
• Relations with China: India continued the rapprochement process begun after the Modi–Xi meeting in October 2024. 
  • The steps included reopening the Kailash-Mansarovar pilgrimage, restoring visas and flights, and resuming water data sharing.
• Multilateral Engagement: Despite China’s support for Pakistan during Operation Sindoor, Indian leaders attended the SCO meetings in China. 
• Neighbourhood Engagements: India strengthened ties with Bhutan, Sri Lanka and the Maldives. Prime Minister Modi visited all three countries in 2025.
• Humanitarian Assistance: India provided $450 million in aid to Sri Lanka after Cyclone Ditwah. The cyclone killed more than 600 people, and India’s support was widely appreciated.

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Roadmap for 2026

• Trade Negotiations: India concluded bilateral trade agreements with the U.K., Oman and New Zealand.
• Pending Trade Deals: Trade agreements with the U.S., EU, Australia, EAEU, GCC and ASEAN remain pending. However, breakthroughs are expected in early 2026.
• India–EU Engagement: EU Commission President Ursula von der Leyen and Council President Antonio Costa are expected for Republic Day. The India–EU free trade agreement is expected to be finalised.
• Regional Elections: India will closely watch elections in Myanmar, Bangladesh, and Nepal, as each has implications for India.
• Multilateral Engagements: India will host the Artificial Intelligence Summit in February. Canadian Prime Minister Mark Carney is expected to visit India in March.
• Quad and APEC: Attention is on whether Mr Trump will visit India for the Quad Summit. His possible visit to China for the APEC summit is also being watched.
• BRICS and G-20: Leaders, including Vladimir Putin and Xi Jinping, will be invited to the BRICS and G-20 Summits. 
  • Mr Modi will be invited to the G-20 Summit on a Trump property in Miami in December, just after key mid-term elections in the U.S.

Conclusion

After a year of geopolitical turmoil, Indian foreign policymakers hope for fewer surprises. A more realistic and tempered assessment of India’s diplomatic options is considered necessary.

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