Foreign Relations in 2025: Trade Friction, Troubled Neighbours, and Strategic Hedging
By our team of in-house writers.
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First publised on 2025-12-24 05:22:28
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By our team of in-house writers.
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India's foreign policy in 2025 unfolded within narrowing margins. The year was shaped less by breakthroughs than by pressure management - on trade, along contested borders, and across a neighbourhood that grew steadily more unstable. Diplomacy remained active, but ambition was constrained. The emphasis was on signalling, containment and hedging rather than alignment or escalation.
What distinguished 2025 was not India's retreat from global affairs, but its determination to stay engaged everywhere without being locked in anywhere.
Trade Deals in a Hardening World
Trade diplomacy dominated India's external engagement in 2025, largely as a defensive exercise. Negotiations with the European Union continued without closure, stalled over carbon border adjustment measures, labour conditionalities and agricultural access. Talks with the United Kingdom moved incrementally, focused on services mobility and regulatory recognition rather than a comprehensive free-trade framework.
Engagement with Gulf partners proved more productive, centred on energy security, logistics corridors and sovereign investment flows. These arrangements reflected a global shift away from liberalisation towards managed economic partnerships.The most disruptive pressure, however, came from Washington.
Trump's Return and the Tariff Shadow
Donald Trump's return to the White House reintroduced uncertainty into India-US trade relations. While 2025 did not see immediate blanket tariffs on Indian goods, the language of reciprocal tariffs and domestic manufacturing protection returned with force.
Indian exporters - particularly in pharmaceuticals, engineering goods and IT-enabled services - faced renewed regulatory anxiety. New Delhi's response was cautious and transactional: seeking sector-specific exemptions, delaying confrontation, and insulating defence and Indo-Pacific cooperation from commercial friction.
Strategic convergence with Washington held. Trade certainty did not. Despite periodic utterances that a trade deal was imminent, even the Yuletide spirit failed to bring the good news.
Bangladesh: From Strategic Partner to Strategic Risk
India's most serious foreign-policy challenge in 2025 emerged not from adversaries but from a neighbour long regarded as stable. Bangladesh entered a period of acute political turmoil marked by protests, state violence and an abrupt turn in public rhetoric against India. The interim government led by Mohammed Yunus took several measures that were distinctly anti-India but India acted with restraint.
The crisis sharpened when Sheikh Hasina left Dhaka and flew to India, amid escalating unrest. Her departure became a rallying point for opposition mobilisation. Protest leaders Sharif Osman Hadi, Nahid Islam and Asif Mahmud accused India of propping up an authoritarian regime, fuelling sustained anti-India demonstrations.
Tensions escalated further in December, following the killings of Hadi and Motaleb Shikdar by masked killers. Their deaths triggered violent demonstrations, attacks on Indian-linked properties and a sharp diplomatic downturn. India and Bangladesh entered a cycle of visa restrictions and retaliatory curbs, freezing people-to-people exchanges that had underpinned bilateral ties for over a decade.
New Delhi responded with restraint - tightening border security, limiting public commentary and prioritising spillover containment. Bangladesh shifted decisively in India's calculus: from success story to volatility risk.
Pakistan: Hostility, Symbolism, and the No-Handshake Signal
On April 22, terrorists killed 26 civilians near Pahalgam in Jammu and Kashmir, one of the deadliest attacks on civilians in the Valley in over a decade. India's response was swift and unprecedented in scale. On May 7, the armed forces launched Operation Sindoor, striking nine terror camps across Pakistan and Pakistan-administered Kashmir. Pakistan responded with drone and missile attacks, leading to four days of high-intensity military engagement. A ceasefire was announced on May 10 following direct communication between the Directors General of Military Operations, amid sustained diplomatic engagement by global actors, including the United States.
During international fixtures, the Indian cricket team adopted a deliberate no-handshake policy with Pakistani players - an unofficial but unmistakable signal. In the absence of diplomacy, symbolism filled the vacuum. Sport became an extension of state messaging: no normalisation without accountability.
China: Managed Tension Without Trust
China remained India's most consequential strategic challenge. Border disengagement talks continued, producing incremental adjustments but no restoration of trust. Troop deployments along the Line of Actual Control remained heavy. Things escalated when an Arunachal Pradesh resident holding an Indian passport was harassed at a Chinese airport. India lodged a strong protest and reiterated that since Arunachal was an integral part of India, persons holding Indian passports and residing in Arunachal must not be subjected to such ordeal.
Economic ties told a contradictory story. Trade volumes stayed high, underscoring India's dependence on Chinese intermediates. Supply-chain diversification advanced slowly. Technology restrictions and investment screening continued, but decoupling remained selective. India's China policy in 2025 was one of management, not resolution.
Russia, Oil, and the Reality of Strategic Autonomy
India's continued purchase of discounted Russian crude became the clearest test of strategic autonomy in practice. Despite sustained US pressure to curb energy trade with Moscow, New Delhi held firm, arguing that energy security could not be subordinated to alliance politics. Russian oil cushioned domestic inflation and stabilised refinery operations at a time of global volatility.
Washington's response was pointed but restrained. Concerns about funding Russia's war economy were raised repeatedly, yet the US stopped short of punitive action, acknowledging both India's economic compulsions and strategic weight. The tension exposed the limits of alignment in the India-US relationship: close, but not compliant.
That balance was underlined by President Vladimir Putin's visit to India, which emphasised continuity over symbolism. Energy supply, defence legacy systems and long-term contracts dominated the agenda. India avoided rhetorical endorsement of Russia's broader geopolitical posture, but made its position unmistakable - foreign policy choices would remain interest-driven, not outsourced.
Bloc Diplomacy: Multi-Alignment as Strategy
India's engagement with multilateral and plurilateral blocs in 2025 reflected deliberate multi-alignment, not fence-sitting. Forums were used as tools, not identities.
BRICS, now expanded and increasingly shaped by China and Russia, was approached cautiously. India resisted overt anti-West positioning while engaging selectively on development finance and limited discussions on currency diversification, without binding commitments.
At the Shanghai Cooperation Organisation, India maintained participation despite China-Pakistan dynamics, using the platform primarily for regional security visibility rather than integration.
India's ASEAN-centred diplomacy - through the ASEAN-India partnership, East Asia Summit and ASEAN-led security forums - anchored its Indo-Pacific posture without alliance entanglement, with maritime security and connectivity at the core.
The Quad remained India's most consequential plurilateral security framework, focused on maritime awareness, supply-chain resilience and infrastructure coordination. I2U2 matured into a functional economic platform linking India with Israel, the UAE and the US, particularly in food, energy and infrastructure.
Quieter engagement continued with IBSA and other Global South platforms, though with reduced visibility. Agenda-setting gave way to maintenance.
Together, these blocs expanded India's strategic depth without narrowing strategic choice.
The Foreign-Policy Balance Sheet
By the end of 2025, India's foreign relations reflected constraint more than confidence. Trade negotiations slowed under protectionist pressure. The neighbourhood demanded crisis management rather than celebration. Relations with Pakistan and China remained unresolved but contained. Multilateral blocs functioned as hedging mechanisms, not ideological anchors. India neither overreached nor retreated. It calibrated.
The defining feature of 2025 was not ambition, but control - using diplomacy, symbolism and selective engagement to navigate a world less tolerant of missteps. Whether calibration alone can deliver long-term strategic and economic gains remains uncertain. But in a year of pressure, India chose restraint over risk. That choice defined its foreign policy.
