India’s ‘year of crisis’

Publishing date: 11 January 2026

Published in: Business Recorder

India’s “year of crisis” is no longer a regional talking point; it has been registered by the wider world. So, when the Financial Times characterised 2025 as a year of failures and setbacks for New Delhi, it reflected an assessment already taking shape among international markets, policymakers and strategic planners. The description captured a broader recalibration underway beyond South Asia, driven by events that challenged assumptions about India’s trajectory.

The most consequential of these was the brief but destabilising military confrontation with Pakistan in May. India launched military action after the Pahalgam attack without presenting a shred of evidence linking the incident to the Pakistani state. Islamabad denied involvement and called for a neutral investigation, a position later echoed by United Nations experts who noted the absence of attribution required under international law. That finding mattered. It stripped New Delhi’s action of legal cover and reframed the episode from counterterrorism to unilateral escalation.

Also, the war itself ended not in Indian dominance but a snap tactical defeat at the hands of Pakistan’s armed forces, prompting a ceasefire brokered by external actors, principally the United States. Pakistan demonstrated clear and credible conventional capability, most notably through the downing of Indian aircraft, including advanced platforms. Pakistan’s superiority forced a rapid reassessment of escalation dynamics and punctured assumptions that India could impose costs without facing meaningful retaliation. The speed with which foreign capitals moved to de-escalate the situation reflected concern over Indian miscalculation, not confidence in Indian control.

Efforts in New Delhi to retrospectively repackage the episode as strategic success found little resonance inside and outside India. Internationally, the lesson was sobering: ambition had outpaced preparedness. For a state seeking recognition as a global heavyweight, the episode raised uncomfortable questions about judgment under pressure.

That military setback fed into a broader pattern of strain. India entered 2025 intent on exercising strategic autonomy across major power blocs. In practice, that balancing act faltered. Trade negotiations with the United States stalled repeatedly, followed by the imposition of additional tariffs. Relations with China saw cautious re-engagement but remained burdened by distrust. In South Asia, ties with Bangladesh deteriorated sharply after political upheaval in Dhaka, narrowing India’s room for manoeuvre in its immediate neighbourhood.

Economic indicators reinforced the sense of drift. The rupee weakened steadily, touching record lows against the dollar. Reform momentum slowed, and expectations tied to tax harmonisation and manufacturing-led growth were only partially realised. None of this suggested imminent collapse, of course, but together these signals challenged the narrative of inexorable rise. International observers respond to trajectories, not slogans, and India’s trajectory in 2025 appeared less assured than it had a year earlier.

For Pakistan, the significance lies in how these developments recalibrated external perceptions. Islamabad’s emphasis on evidence, legality and restraint during the crisis resonated more widely than in past confrontations. The UN experts’ rejection of unilateral self-defence claims without attribution reinforced Pakistan’s position from the outset. Similarly, warnings against placing the Indus Waters Treaty in abeyance outside its legal framework aligned squarely with Islamabad’s insistence that water cannot be weaponised without violating international obligations.

These were not just rhetorical wins. They were institutional validations. As a result, foreign capitals have grown more cautious in accepting Indian narratives at face value, particularly where escalation risks are concerned. India’s aspiration to act as a regional security provider is now being weighed against its demonstrated capacity to manage crises without destabilising consequences.

Much of this reassessment traces back to policy choices under Prime Minister Narendra Modi. A preference for muscular signalling, an inclination to blur legal boundaries in the name of deterrence, and an overestimation of India’s ability to shape outcomes unilaterally, have all carried costs. Power projection requires discipline as much as confidence. In 2025, confidence often ran ahead of restraint in Delhi.

The world has noticed, and it is adjusting accordingly. For Pakistan, the lesson is more of clarity than just triumph. Positions grounded in law, evidence and proportionality endure longer than those built on assertion and spectacle. As regional dynamics continue to evolve that distinction may prove more consequential than any single crisis; however dramatic.