A New Strategic Compass for India in a...

The global order shaped after the Cold War is steadily eroding due to trade fragmentation, geopolitical rivalries, the politicisation of finance, and the weakening of multilateral institutions.
As 2026 begins, India confronts a world without stable rules or predictable alliances, requiring a recalibrated strategic outlook.

Changing Global Landscape

End of Rule-Based Certainty: Multilateralism is weakening as tariffs rise, supply chains fragment, and trust in global institutions erodes.
Return of Mercantilism: Country-specific tariffs and protectionist policies are replacing open trade regimes.
Geopolitical Flux: Conflicts in Ukraine, West Asia, and Africa indicate a world neither fully at war nor at peace.
Politicised Finance: Currency dominance, sanctions, and fiscal stress in advanced economies are reshaping global capital flows.

Trade Diversification: Aggressive pursuit of Free Trade Agreements to offset protectionism.
Financial Sovereignty: Promotion of rupee-based trade settlements with over 22 countries and reduced exposure to U.S. Treasuries.
Balanced Diplomacy: Issue-based engagement across rival blocs while maintaining strategic autonomy.
Climate Leadership: Achieved 50% non-fossil electricity capacity ahead of Paris commitments.

Flexible Multilateralism: Shift from permanent alliances to issue-based coalitions and Global South platforms.
- This will strengthen crisis management capabilities in a transactional global environment.
Demography-Development Linkage: Global ageing contrasts with India’s youth bulge, creating opportunities in labour mobility and skill exports.
- Youth dividend must be converted into productivity through education, healthcare, and skill partnerships with ageing economies.
Strategic Autonomy in Security: Diversify defence procurement to enhance deterrence without alliance dependence.
- Lead regional security dialogues, especially in the Indo-Pacific and West Asia, where global institutions are ineffective.
Fiscal Prudence and Stability: Global bond markets increasingly constrain high-deficit economies.
- India must sustain fiscal discipline to manage deficit targets amid moderate nominal growth and subdued tax buoyancy.

Tax buoyancy refers to the responsiveness of tax revenue to changes in economic growth.
Higher tax buoyancy implies that tax revenues grow faster than GDP, strengthening fiscal capacity without raising tax rates.

Technology as a Growth Multiplier: Scale up public and private investment in AI, quantum computing, and frontier technologies.
- Strengthen digital skills, research ecosystems, and higher education partnerships under NEP.

Climate-Growth Integration: Align decarbonisation with productivity through electrification, renewables, EVs, and green hydrogen.
- Leverage platforms like the International Solar Alliance to mobilise capital and technology for the Global South.

Leveraging India’s Strengths: Harness entrepreneurship by freeing land, labour and capital.
- Leverage Global Capability Centres (GCCs) for technology diffusion and export value, not just volume.