US tariffs, election pressures, and balance of geopolitics are coming together, and this reduces the leeway available to the New Delhi government. The year 2026 finds India at a point in time when the distinction between foreign policy, domestic politics, and economic performance is becoming increasingly blurred. For the Modi-led government, this blurring of boundaries presents a tough political climate compared to any other in the past decade.
The past year has been testing Indian diplomacy in various ways. A short but fiery conflict between India and Pakistan in May, which quickly followed by a significant downturn in relations between New Delhi and Washington. The Trump administration had imposed 50% tariffs on Indian goods because it had continued buying oil from Russia, despite the lack of a bilateral trade agreement within the agreed deadline. This added insult to injury, as the US had increased its outreach efforts in Pakistan, reigniting Indian concerns about the reliability of American foreign policy.
The neighborhood surrounding India became even more volatile. With the coming of politics in Nepal and the formation of a new government in Bangladesh in 2024, the entire South Asian continent could now start walking down an uncertain path.
Success at home hid external pressures, for the moment anyway
The Indian Modi government has so far eased these difficulties by speaking about success stories within India. The BJP as a political party has been performing very well in state assembly elections. The economy, with reforms that involve adjusting the Goods & Services Tax structure, and the passage of novel labor laws, has been cited as evidence that policy interventions are still being made by the Modi administration. Free trade agreements have been concluded with India and the UK, Oman, and New Zealand.
Primarily, however, it is important to state that the news on growth was good. The Gross Domestic Product recorded above 8% in mid-2025, making India’s economy firmly established as thefastest-growing Large Economy in the world. India’s domestic market and public expenditure protected it against the shocks in world markets, but not for long.
2026: where politics and economics interlink
The true effects of US tariffs will feel in 2026. Recent data about growth is prior to such implementation. If such tariffs, or an increase in those measures, such as secondary sanctions on nations doing business with Russia, Indian exports, manufacturing, and job creation might be under severe strain.
This has political implications. India is set to conduct an election in four states, as well as one Union Territory, in 2026. Growth slowdowns, work-related pressures, or inflation could impair the government’s effectiveness in rebuffing foreign policy challenges with home success.
New Delhi believes that the diversion of trade may ease the impact. The significant factor for the country has been the pending trade agreement with the European Union. Talks have been going on since 2007, and an agreed target expired in 2025. Pressure now exists on to agree on an arrangement before European Commission Chief Ursula von der Leyen’s visit to the country.
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Summit diplomacy and strategic reservations
India looks forward to hosting large international summits in the next year, including the AI Impact Summit and the BRICS Summit. In addition, possibly seeking to progress after some postponements, it may resume hosting the postponed ‘Quad Summit’ when finally stabilised will be the state of India-US relations.
Yet, there seem to exist AUA situations within Indian policy that are more apparent than ever. The absence within the Pax Silica grouping for key technologies indicated that it is no longer a key player in forming the emerging paradigm for global governance. While investment for data centres in India persists, particularly by a US firm, lack in manufacturing and the highest-end semiconductor wafers building ramps up.
“quiet diplomacy” and “louder A measured Indian reaction to global crises, whether in Ukraine, Gaza, or Venezuela, is its attempt to ensure that it maintains its lines of communication open in hostile blocs. Though this versatility has helped it retain its lines open, it has also continued to make it susceptible to criticism for speaking out of both sides of its mouth, as it holds its values of sovereignty and territorial integrity in esteem.
Being perceived as a leader of the Global South means there are certain expectations associated with such a role. Pressures associated with economic pressure within the state will make the leadership in the Global South increasingly difficult to maintain in terms of values and alliances in
What to watch in 2026
The problem facing India is no longer just on the external front. Foreign policy choices will begin to directly impact economic outcomes, which will, in turn, begin to impact electoral politics. If the economy slows down because of tariffs, summit-level diplomacy and strategic ambiguity may not be enough to calm the electorate.
In 2026, the international stance of India, along with its politics and economic developments, will march in perfect sync – thereby leaving no room for a margin of error as has been the case with the Modi administration so far.
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