Principled pragmatism at work, economic security, and setbacks

No doubt, in 2025, India’s foreign policy and global outreach faced its toughest challenge due to many global upheavals and conflicts. Objectively, in some areas it seems to have settled into a recognisable rhythm: pragmatic where it must be, principled where it can be, with a fair list of setbacks in the rapidly changing geopolitical theatre.

While the ongoing India-US trade tariffs are certainly a matter of concern due to President Trump’s ideas of geoeconomic gains, it cannot take away the essence of India’s global engagements and assessment in its entirety.

The year’s diplomatic ledger shows revivalism in the immediate neighbourhood, expanding footprints of the Global South, and tangible economic and defence diplomacy successes—tempered by real setbacks with key partners that New Delhi cannot afford to ignore.

One area where India’s principled stance tried to secure its ground is External Affairs Minister Jaishankar-led global outreach, trying to level up the Russian oil import issue with the European partners; however, some perceptions remained in the Western world. India’s effort, manifested in several parliamentary delegations across many countries, brought mixed responses. But that also added to the continuity of India’s unique position and the complexity of India, and its quest for economic security.

Neighbourhood first: Policy revisits

If we need to look at the dividend of 2025 in terms of the Neighbourhood First doctrine. After years of turbulence, Sri Lanka–India relations seem to be normal. India’s steady financial assistance, infrastructure support, and sensitivity to Colombo’s domestic constraints have rebuilt trust.

Crucially, New Delhi avoided triumphalism during Sri Lanka’s crisis recovery, reinforcing the perception of India as a reliable first responder rather than a coercive big brother.

Nepal–India relations seem to be stable in a normal phase. Despite the Gen-Z protests, a greater political maturity on both sides mitigated the public disputes over maps and borders; connectivity (railway projects), cooperation on energy, and people-to-people ties have helped reset a historically emotional relationship.

Perhaps the most symbolic progress has been with the Maldives. After a period of sharp rhetoric and strategic anxiety, relations have been reconciled through quiet diplomacy, economic engagement, and respect for Maldivian sovereignty. India’s restraint here seemed more effective than megaphone diplomacy.

The major regional disappointment remains Bangladesh. Political uncertainty, perception gaps, and unresolved issues have created a setback that contrasts sharply with otherwise improving neighbourhood dynamics. Sheikh Hasina’s entry into India remains a matter of concern for the Bangladesh interim government and political parties, for their angst against her. The principled stance that India took for Hasina is an essential element of India’s foreign policy for friends. India’s Myanmar strategy in 2025 reflects sober realism. Outreach to multiple stakeholders, humanitarian support, and border security cooperation underline New Delhi’s recognition that

disengagement would only cede space to hostile actors. However, the approach is cautious, calibrated, and regionally conscious—more about maintaining normalcy than ideal outcomes.

For India, this is a reminder that long-standing goodwill cannot substitute for continuous political investment.

Afghanistan: Realism over rhetoric

The Ministry of External Affairs’ radical yet pragmatic engagement with Taliban-ruled Afghanistan stands out as one of the year’s boldest choices. Without formal recognition, India has maintained channels focused on providing aid, promoting regional stability, and protecting its long-term interests. It is an uncomfortable policy—but arguably the only realistic one in a region where moral absolutism offers little strategic return. There is no question: a closer Afghanistan is counter-effective against a rogue state like Pakistan.

India–China: Strategic restraint or strategic drift

No assessment of India’s foreign policy in 2025 can ignore the unresolved and increasingly uncomfortable reality of India–China relations. Despite sustained diplomatic engagement and military-level talks, the border remains tense, undefined, and fundamentally unstable. Beijing’s coercive posture—particularly its renewed pressure and rhetorical escalation over Arunachal Pradesh—is not episodic but structural. It is a deliberate strategy to keep India strategically boxed, politically distracted, and militarily stretched.

Even more troubling is the widening trade imbalance. India’s trade deficit with China has ballooned to unsustainable levels, reinforcing a dependency that directly undermines India’s strategic autonomy. While New Delhi speaks the language of diversification and decoupling, Chinese imports continue to dominate critical sectors—from electronics and pharmaceuticals to renewable energy components. This weakens India’s bargaining position and emboldens Beijing.

China’s grip over global supply chains further compounds the problem. Beijing’s ability to weaponize interdependence—by controlling inputs, prices, and logistics—gives it enormous coercive leverage. India, despite its manufacturing ambitions, remains a price-taker rather than a rule-setter in many of these value chains. The result is a paradox: China is India’s principal strategic challenger and simultaneously one of its largest economic partners.

Arunachal Pradesh has become a particular target of psychological and diplomatic pressure, aimed not at immediate territorial gain but at steadily eroding India’s red lines. India’s responses—firm yet cautious—have avoided escalation but risk being interpreted in Beijing as strategic hesitation.

Managing China requires more than troop deployments and diplomatic protests; it demands reducing economic vulnerabilities, accelerating supply-chain resilience, and aligning domestic industrial policy with geopolitical realities. Without addressing the structural trade imbalance and dependency on Chinese inputs, India’s China policy risks becoming reactive rather than strategic.

Global South leadership and the G20 moment

India’s claim to leadership of the Global South has matured a bit beyond rhetoric. The G20 presidency continues to raise development discourse, debt relief conversations, and digital public infrastructure cooperation. Rather than positioning itself as a rival to the West, India has framed itself as a bridge—an approach that resonates across Asia, Africa, and Latin America.

India–Africa relations, particularly with countries like Ethiopia, Kenya, Nigeria, and South Africa, have become central nodes in India’s Africa strategy, have deepened through development partnerships, capacity-building, and trade facilitation. Unlike extractive models of engagement, India’s Africa outreach emphasises skills, local ownership, and long-term institutional ties.

Economic diplomacy and defence exports: Work in progress

One of 2025’s underappreciated achievements is the acceleration of free trade agreements. India’s willingness to conclude faster, more focused FTAs marks a departure from its traditionally cautious trade posture.

On the trade front, India did manage to conclude free trade agreements with the United Kingdom, Oman, and New Zealand, reflecting a willingness to integrate selectively with global markets. Yet these successes only partially offset the disappointment of unmet ambitions. The largest and most consequential trade deals—those with the United States and the European Union—remain unsigned. These deals, combined with supply-chain diplomacy, have contributed tangibly.

However, the significance is the rise of defence exports. It is an uncharted territory, dominated and distorted by a few. Indian platforms, ammunition, and maintenance services found buyers across the Global South, sending worth Rs 28000 crore of indigenous military equipment to new partners like the Philippines, Armenia, among others. This is not just about revenue—it is about strategic influence, interoperability, and establishing India’s defence-industrial base.

The Challenges: Strategic friction with major partners

Yet 2025 is not a story of unbroken ascent. India–US relations, while structurally strong, have faced a perceptible setback. Differences over trade, technology controls, and strategic expectations have slowed momentum. India’s clear stance on agriculture is no bargaining area—that the US trade hawks do recognise that it is non-negotiable.

While India’s relations with many European countries saw many one-on-one deeper engagements, high-level visits, and some significant pacts –for example, mobility pact with Finland– India–EU relations continue to move more slowly than their potential. Russia-Ukraine conflict, regulatory friction, climate conditionalities, and trade disagreements persist, preventing a full strategic convergence.

The India–Bangladesh setback is perhaps the most worrying challenge. Given Bangladesh’s importance to India’s eastern strategy, rebuilding trust there should be a diplomatic priority in the coming year.

Foreign policy defined by continuity

India’s foreign policy in 2025 began to show a different approach, somewhat comfortable with complexity. The emphasis on pragmatism—visible from Kabul to Male—signals a long-term trajectory.

The challenge ahead is clear: consolidate neighbourhood gains, repair key bilateral setbacks, and translate global leadership into durable partnerships. India’s diplomacy has momentum—but momentum, like power itself, must be carefully managed to endure.

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