India's foreign policy landscape in 2025 emerged as a complex exercise in crisis management, marked by the nation's efforts to preserve strategic autonomy while navigating tariff shocks, regional tensions, and pressure from global powers. The year presented unprecedented challenges that tested India's diplomatic flexibility and economic resilience in an increasingly transactional international order.

US Trade Relations: From Optimism to Crisis

The year began with considerable optimism regarding India-US relations under President Donald Trump's second term, with India's participation in an early Quad meeting signaling continued strategic partnership. However, this optimism rapidly deteriorated following Trump's announcement of reciprocal tariffs in April, culminating in the imposition of 50% tariffs on Indian exports.

This punitive measure left India facing higher US tariffs than China, effectively reversing two decades of carefully constructed bilateral ties. The decision represented a severe blow to a partnership that had been strengthened by shared strategic concerns, particularly regarding China's regional influence.

Strategic Trade Diversification Initiative

In response to US trade volatility, India pursued an aggressive diversification strategy, successfully finalizing comprehensive economic agreements with three key partners. These deals represent India's attempt to hedge against US market uncertainties while demonstrating alternative partnership options.

Key Trade Agreement Details

The India-UK Comprehensive Economic and Trade Agreement includes specific provisions for reducing whisky tariffs from 150% to 75%, with further reductions to 40% planned over time. Additionally, the European Union approved 102 new Indian fishery units for export in September, raising the total number of EU-cleared establishments to 604, partially offsetting marine export losses.

China Relations: Cautious Diplomatic Thaw

India took measured steps toward stabilizing relations with China in 2025, despite persistent mistrust over disputed border territories. The most significant development occurred during the Shanghai Cooperation Organisation summit in August, where Prime Minister Narendra Modi and Chinese President Xi Jinping met for the first time in seven years.

Both leaders publicly characterized their nations as "development partners and not rivals," signaling an attempt to move beyond the post-2020 diplomatic freeze. Confidence-building measures implemented during the year included:

• Resumption of direct flights between the two countries
• Reopening of the Kailash Manasarovar pilgrimage route
• Gradual revival of people-to-people exchanges
• Military disengagement along disputed border areas

However, significant frictions persisted throughout the year. Beijing maintained close coordination with Pakistan following the April terror attack in Pahalgam and later detained two Indian travelers while reiterating territorial claims over Arunachal Pradesh.

Russia Partnership: Energy Security Balancing Act

India's relationship with Russia in 2025 exemplified the delicate balancing act central to its foreign policy approach. The partnership centered on sustained discounted oil imports, with Russia becoming India's largest crude oil supplier.

President Vladimir Putin's visit to India in December resulted in commitments for "uninterrupted" oil shipping, with both countries describing their partnership as "resilient to external pressure." This relationship provided India with crucial energy security while maintaining independence from Western sanctions regimes.

Economic Policy Challenges and Future Outlook

Despite trade diversification efforts, analysts caution that new free trade agreements cannot fully replace the scale of the US market. Former Commerce Secretary Anup Wadhawan emphasized that "the single-pointed issue that needs to be addressed is to make India more business-friendly," suggesting that domestic economic reforms remain crucial for long-term growth and competitiveness.

As geopolitical competition intensifies and tolerance for strategic ambiguity diminishes, India's ability to manage parallel relationships without formal alignment will continue defining its foreign policy effectiveness. The nation's 2025 experience demonstrates both the challenges and opportunities inherent in maintaining strategic autonomy in an increasingly polarized global environment.

Indian equity markets surged on Wednesday, the final trading session of 2025, with the BSE Sensex climbing 645 points or 0.76% to an intraday high of ₹85,320.05, while the NSE Nifty 50 advanced 217.45 points or 0.80% to an intraday high of ₹26,156.05. The rally marked a strong rebound after the Sensex and Nifty had declined for five and four consecutive sessions respectively.

Market Performance and Key Levels

The markets demonstrated remarkable strength throughout the trading session, building significantly on modest opening gains:

Market breadth remained strongly positive with 2,764 stocks advancing against 1,253 declines on the BSE, where 4,182 stocks were traded. As many as 111 stocks touched 52-week highs while 114 hit 52-week lows, with 169 stocks in the upper circuit and 103 in the lower circuit.

Steel Stocks Lead Rally on Safeguard Duty Announcement

Metal stocks emerged as the primary drivers of the rally after the government announced a three-year safeguard duty of 12% on select steel product imports, aimed at protecting domestic producers from low-cost overseas supplies, particularly from China:

The government's decision to impose the 12% duty on certain steel imports for three years provided significant support to steelmakers, helping them outperform the broader market as investors welcomed the protective measures against low-priced international competition.

Crude Oil Decline Supports Market Sentiment

Brent crude oil prices eased 0.10% to $61.27 per barrel, providing additional support to Indian equities by reducing inflationary pressures. Oil prices have declined more than 10% in 2025, with Brent crude on track for its longest run of annual declines as global supply outpaced demand despite geopolitical tensions.

Broader Market Indices Outperform

Broader market indices continued to show exceptional strength, outpacing the benchmark indices:

Expert Analysis and Year-End Outlook

Ponmudi R, CEO of Enrich Money, noted that the Nifty was holding above the 25,900 support level with resistance at 26,100-26,160, while Bank Nifty maintained stability above 59,200 with resistance at 59,400-59,500. Despite the surge, trading volumes remained thin due to global holiday closures and year-end position squaring.

Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd., emphasized the year's performance: "After a weak start, Nifty staged a strong comeback to end the year with a solid gain, with Santa-rally optimism remaining intact on Dalal Street, aided by hopes of rate cuts and year-end window dressing, setting a constructive tone for the future."