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COVER STORY JANUARY 16, 2026 | The Indian Eye 5

chance to anchor itself more firmly in rendra Modi in the coming year be-
a multipolar West. cause they serve as the earliest and
Within the Indo-Pacific, India con- most reliable barometer of national
tinues to work closely with Japan and mood between general elections.
Australia while strengthening ties with While Modi’s authority at the Cen-
Southeast Asian states wary of China’s tre remains strong, state contests are
assertiveness—Vietnam, Indonesia shaped by local issues—prices, jobs,
and the Philippines among them. Afri- caste equations, agrarian distress, and
ca, too, is being reimagined not merely governance fatigue—that can blunt
as a theatre of Global South rhetoric the appeal of national leadership. A
but as a zone for selective, tangible string of setbacks in key states would
partnerships, particularly through re- not threaten the government in Delhi,
gional economic communities. but it could dent the aura of electoral
Closer home, Modi’s foreign poli- invincibility that has been central to
cy faces its most delicate tests. Pakistan Modi’s political capital.
remains the hardest problem. The les- These elections will also test the
sons of “Op Sindoor” have reinforced Prime Minister Narendra Modi with Uttar Pradesh Chief Minister Yogi Adityanath in New Delhi BJP’s organizational depth beyond
the reality that two nuclear neighbors (@PMOIndiaX/ANI Photo) Modi’s personal popularity. Regional
cannot afford perpetual silence. A parties, often written off in national
calibrated revision of Pakistan poli- narratives, remain formidable on their
cy—without illusions, but with com- performance can be sustained. Econ- persistent selling by existing investors, home turf and are increasingly willing
munication channels intact—may be omists expect a return to more “nor- and the lagged effects of global trade to unite tactically against the BJP. For
unavoidable. Bangladesh, meanwhile, mal” conditions. Growth is projected disruptions. Modi, the challenge is to balance na-
demands pragmatism over nostalgia, to moderate to around 6.8–7 per cent, Beyond markets, structural chal- tional messaging with credible local
as India works to preserve stability while inflation could rise toward the lenges loom large. Gold prices, up leadership, adapt campaign strategies
after the long “golden chapter” of RBI’s 4 per cent target. Paradoxical- nearly 65 per cent in 2025, have al- to diverse state realities, and prevent
Sheikh Hasina. ly, this mean reversion may help India tered consumer behavior, pushing state-level losses from snowballing
In West Asia, where Israel has by boosting nominal growth, tax col- Indians toward coins and bars rather into a broader political narrative of
emerged as the dominant military lections and corporate revenues that than jewellery. More worrying is the vulnerability.
power with U.S. backing, India is fo- were hurt by ultra-low inflation. water crisis. India’s dominance in Yet Modi’s approach suggests a
cused on resilience—protecting its The bigger puzzle lies in finan- global rice exports has come at the preference for narrative control and
diaspora, energy interests and strate- cial markets. Despite robust growth, cost of depleting groundwater, hurt- institutional continuity rather than
gic partnerships with players ranging Indian equities had their worst rela- ing agriculture, industry and urban reactive politics. Equally important is
from Saudi Arabia and the UAE to tive performance against emerging consumers alike. Managing growth maintaining a calmer domestic envi-
Iran and Qatar. markets since 1994. Foreign investors sustainably—especially in water-in- ronment to support foreign policy and
India’s BRICS presidency in 2026 sold record amounts of Indian shares, tensive sectors—will be one of Modi’s economic decision-making. As India
adds another layer of complexity. Dis- chasing returns elsewhere and wary toughest economic tests. navigates global uncertainty, internal
enchanted with old-style multilateral- of frosty India–U.S. relations. The ru- Domestic Politics: cohesion becomes a strategic asset.
ism, New Delhi has invested in pluri- pee, too, suffered its sharpest annual Stability as Strategy A Test of Leadership
lateral platforms. But the dilution of fall in three years, driven less by trade
the Global South consensus during weakness than by capital outflows. t home, India’s political chal- he road ahead is undeniably
the G20 years has underscored a les- For 2026, the outlook is cautious- lenge in 2026 is not instability complex. A transactional Unit-
son: solidarity must be real, not rhe- ly optimistic. Investment banks see Abut intensity. With major elec- Ted States, an assertive China,
torical. How India steers BRICS amid scope for a rebound if earnings sur- tions on the horizon, competition is fragile multilateralism, volatile mar-
shifting global power equations will prise positively, reforms continue, and sharpening. kets, and environmental stress form
test its diplomatic finesse. geopolitical uncertainty eases. But State elections will be a critical a dense web of risks. Yet India enters
Economy: Strength with risks persist: a weakening currency, political test for Prime Minister Na- this phase better prepared than many
Vulnerabilities peers—economically resilient, diplo-
matically diversified, and politically
f geopolitics surprised India in led by a Prime Minister who thrives in
2025, the economy confounded moments of flux.
Ieven optimists. Growth surged to The real test of 2026 will not
7.3 per cent, prompting the Reserve be whether challenges arise—they
Bank of India to repeatedly upgrade will—but whether India can manage
its forecasts. Private estimates were them simultaneously. Under Modi,
even higher. Inflation, remarkably, the country is attempting exactly
fell to around 2 per cent, creating that: protecting its interests without
what RBI Governor Sanjay Malhotra retreating from the world, sustaining
called a “Goldilocks” economy—nei- growth without ignoring vulnerabil-
ther too hot nor too cold. ities, and keeping domestic politics
India also crossed a symbolic robust but stable.
milestone, overtaking Japan to be- In an age of global polycrisis, In-
come the world’s fourth-largest econ- dia’s bet is that strategic autonomy,
omy. While formal IMF confirmation economic momentum and political
is awaited, the ranking underscored Union Minister and BJP National President JP Nadda being felicitated during an interaction clarity can still deliver results. Wheth-
India’s growing weight in the global programme with doctors, in Kolkata on Thursday. West Bengal BJP President Samik Bhat- er that bet pays off will define not just
system. tacharya and State LoP Suvendu Adhikari also present. (@JPNadda X/ANI Photo) the year ahead, but India’s place in
Yet 2026 will test whether this the decade to come.

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