- India suffered a historic military defeat against Pakistan.
- New Delhi failed to reach a trade deal with Washington.
- The Indian rupee touched an all-time low of 91.14 against the US dollar.
The past year has turned out to be a “crisis year” for India, marked by a historic military setback against Pakistan, a weakened currency and growing economic uncertainty. The Financial Times reported in the 2025 annual review.
Due to failed strategic autonomy, India has been forced to simultaneously maintain relations with the United States (US), China and Russia, read the report.
The report adds that the US-India trade deal has been postponed several times, while the imposition of US tariffs has put additional economic pressure on New Delhi.
Similarly, the limited implementation of GST reforms has also hampered economic growth. It also said that the Indian rupee continued to depreciate against the US dollar in 2025.
Operation Sindoor failed as Trump scoffs
Earlier this year, Pakistan and India engaged in a military confrontation, the worst between the old enemies in decades, which was sparked by an attack on tourists in IIOJK’s Pahalgam area, which New Delhi claimed was backed by Pakistan.
Islamabad has denied involvement in the Pahalgam attack, which killed 26 men, and has offered to join a neutral inquiry into the fatal incident.
During the clashes, Pakistan shot down seven Indian fighter jets, including three Rafales, and dozens of drones. After at least 87 hours, the war between the two nuclear-armed countries ended on May 10 with a US-brokered ceasefire agreement.
Pakistan’s historic victory in the four-day skirmishes played an important role in rapprochement between Islamabad and Washington.
In the months since the ceasefire, US President Donald Trump has taunted India through his growing friendship with Pakistan’s Chief of Defense Forces (CDF) and Chief of Army Staff Major General Asim Munir.
US-India trade deal
Few things have attracted more ink than the US-India trade deal that never happened. At first, after Trump’s election victory, there was great rejoicing in New Delhi at getting a friendly administration in the White House.
In February, Modi was one of the first foreign leaders to visit Washington. At the time it looked like India would be one of the first countries to sign a trade deal with Trump.
A deal was expected in May, then June and then July. . . and then the talks started to stop.
In August, Trump’s reciprocal tariffs began, and by the end of the month he had announced additional 25 percent tariffs to punish India for buying Russian oil.
Commerce Minister Rajesh Agarwal said there was a fair expectation that both countries would be able to agree on a lower reciprocal tariff and that India was “positively committed” to the US in the deal.
Trump and Modi have been talking to each other for the past fortnight, and both sides have made heated, vague statements.
By August, when it began to appear that a trade deal with the US was not going to prove risky, the Modi government decided it was time to focus on domestic growth.
The Indian rupee, which has been on a downward slide, has been bruised this year. It lost 6% in 2025, hitting an all-time low of 91.14 against the US dollar.
Ties with China and Bangladesh
Ties between New Delhi and Dhaka have soured since the ousted prime minister, Sheikh Hasina, fled the pro-democracy uprising and sought refuge in India.
On the other hand, India has failed to improve its ties with China despite recalibrating its foreign policy.
Prime Minister Narendra Modi traveled to China for the first time in seven years and met President Xi Jinping. The two countries reaffirmed their commitment to “cooperation based on mutual respect, mutual interest and mutual sensitivity.”
Both parties, however, remain wary of each other.
India accuses China of providing support to Pakistan during the recent four-day war.
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