LONDON: India faced a turbulent 2025, described by The Financial Times as a “year of crisis,” marked by a military setback against Pakistan, a weakening currency, and growing economic uncertainty.
Due to failed strategic autonomy, India was compelled to simultaneously maintain relations with the United States, China, and Russia, the Financial Times reported in its 2025 annual review.
The report adds that the US-India trade agreement was postponed several times, while the imposition of American tariffs placed additional economic pressure on New Delhi.
Similarly, the limited implementation of GST reforms also hindered economic growth. The Financial Times’s report further added that the Indian rupee continued to depreciate against the US dollar during 2025.
Earlier this year, Pakistan and India engaged in a military showdown, the worst between the old foes in decades, which was sparked by an attack on tourists in Indian Illegally Occupied Jammu and Kashmir’s Pahalgam area.
Without presenting any credible evidence, New Delhi blamed Pakistan for the incident. Pakistan condemned the incident and strongly rejected the Indian allegations as baseless.
Pakistan repeatedly offered to participate in a neutral and transparent international probe into the deadly incident. However, India failed to respond to Pakistan’s offer for a probe and continued with its aggressive posture, risking regional peace.
On the night of May 6-7, Indian launched unprovoked aggression against Pakistan and targeted several Pakistani cities, killing innocent civilians. Pakistan swiftly responded to India’s military aggression.
During the clashes, Pakistan downed seven Indian fighter jets, including three Rafale, and hundreds of drones.
After at least 87 hours, the war between the two nuclear-armed nations ended on May 10 with a ceasefire agreement brokered by the US.
Pakistan’s historic victory in the four-day skirmishes played a significant role in bringing Islamabad and Washington closer.
In the months since the ceasefire, US President Donald Trump has taunted India through his growing friendship with Pakistan’s Chief of Defence Forces (CDF) and Chief of the Army Staff Field Marshal Asim Munir.
US-India trade deal
Few things have attracted more ink than the US-India trade deal that never happened.
In the beginning, after Trump’s election victory, there was much jubilation in New Delhi about getting a friendly administration in the White House.
In February, Indian Prime Minister Narendra Modi was one of the first foreign leaders to visit Washington. It seemed then that India would be one of the first countries to sign a trade agreement with Trump, too.
A deal was expected in May, then June, then July , and then talks began to stall.
In August, Trump’s reciprocal tariffs kicked in, and by the end of the month, he had announced an additional 25 percent tariff to punish India for buying Russian oil.
Commerce Secretary Rajesh Agarwal said that there was a fair expectation that both countries would be able to agree on a lower reciprocal tariff and that India was “positively engaged” with the US on the deal.
Trump and Modi have spoken to each other in the past fortnight, and both sides have put out warm, fuzzy statements.
By August, when it began to look like a trade deal with the US was not going to be a shoo-in, the Modi government decided it was time to focus on domestic growth.
The Indian currency, which has been on a downward slide, got a bruising this year. It lost 6 percent in 2025, touching an all-time low of 91.14 against the US dollar.
Ties with China and Bangladesh
Ties between New Delhi and Dhaka have deteriorated since the ousted prime minister Sheikh Hasina fled the pro-democracy uprising and sought refuge in India.
Bangladesh also blamed India of interference in internal affairs and sought Hasina’s extradition to face a court sentence for the deadly crackdown and use of force against youth protesters.
On the other hand, India has failed to improve its ties with China despite recalibrating its foreign policy.
Prime Minister Modi travelled to China for the first time in seven years and met Chinese President Xi Jinping.
The two countries reaffirmed their commitment to “co-operation based on mutual respect, mutual interest and mutual sensitivity”.
Both parties, however, are still wary of each other.
