Parsa Venkateshwar Rao Jr | Looking Ahead to 2026: Fears, Hopes and Uncertainties

Prime Minister Narendra Modi had predicted, in his “Mann ki Baat” address on the last Sunday of 2025, that in 2026 the world will look to India. That is a politician’s optimism, who refuses to see the underbelly of anything at the worst of times. Forget about the underbelly. Things are not looking great even on the outside. There is more friction around the globe. It can be said there was never an ideal situation and one must console oneself if things look a little bit better than they were.

So, how will it be better for India in 2026? Going by the 2024 and 2025 examples, the economy is trundling along. It is not any more in the “sweet spot” of 2015-17. There is no economic boom round the corner. The seven per cent average growth is likely to continue in 2026.

It is reassuring for the government and the party in power that there is no slide in the growth rate but it spells disappointment, if not heartbreak, for ordinary people. The annual growth rate was 6.5 per cent in 2024. In the first half of 2025, it has been eight per cent. The next half of the financial year, 2025-26, will have to do equally well to get to the eight per cent growth rate. That looks a bit too sanguine. It is, however, possible.

The exports and trade deficits are fluctuating. India’s exports grew by 6.01 per cent in 2024. In the first half of 2025, they grew by 5.86 per cent. It is quite gratifying that the imports of smartphones into the United States are from India. The trade deficit is in single digits -- $6.64 billion in November 2025 -- because of reduction in imports of gold, oil and coal. The reduction in the imports of the first is good news, but not so with regard to the other two. It reflects a slowdown in economic activity. The government is not too enthusiastic about pushing the economy into the fast lane. It remains satisfied with things as they are. A seven per cent to eight per cent growth rate per annum is opium for the government.

The government adroitly ducks the challenge of creating jobs and increase in earnings -- wages and salaries -- and it just looks into the distant future. Now the goal is to make India a $7 trillion economy by 2030 and “Viksit Bharat” by 2047. What is to happen in 2026 or 2027 does not seem to matter. The inflation rate is less than two per cent, but the prices of goods and services are rising relentlessly. And the people are feeling the pinch.

They are dissatisfied with the powers that be and the anger is building up. It showed in the 2024 Lok Sabha election when the BJP lost its majority, which it had in 2014 and 2019. The Assembly election victories in Bihar and earlier in Delhi has restored the complacency and arrogance of the BJP. It is this attitude -- the meaning of “attitude” is that of the populist lingo, that of swagger -- that Prime Minister Narendra Modi and the BJP will display in 2026 as it goes into election mode in Assam, West Bengal and elsewhere where Assembly polls are due.

It seemed that India had held its own in 2023 and 2024 despite the headwinds from Canada over the killing of a Sikh agitator, and the European Union pressure over buying oil from Russia, as Moscow waged war against Ukraine and an enraged EU was a helpless spectator. But with the return of Donald Trump as America’s President for a second term, things shockingly and swiftly changed for the worse. Mr Trump’ tariff onslaught did not hit Indian exports as badly as feared, but India’s reputation as an emerging global power took a hit. The notion that no country can meddle with India took a back seat. Along with the punitive tariffs, Mr Trump embracing Pakistan sent out the warning that India will not be left alone in South Asia. Pakistan, which had fallen off the map as it were, was given a seat at the table. The after-effects of the rebellion in Bangladesh continued unabated.

India has of course put on a brave face with the turn of events in Pakistan and Bangladesh, but it has not yet recovered its poise. 2026 will only make the situation in South Asia much harsher. The Modi government will certainly turn the propaganda of its military prowess louder than ever. This will not in any way deter the anti-India rhetoric all across the neighbourhood. Surprisingly, it is China that seems to want to keep its ties on an even keel. The economic compulsions behind Beijing’s neutrality is evident.

Unfortunately, 2026 will not be very different from 2025 -- a complacent and arrogant government, a lot of unhappy people shifting their stance in a mode of palpable irritation, and a worsening international situation, on the economic as well as the security fronts. India will remain a marginal player, whether it is about Gaza or Ukraine. Of course, India had been sending humanitarian aid to Gaza without much fanfare, and it has continued to buy oil from Russia. It will continue to maintain strategic silence over the happenings in Bangladesh and Pakistan. Even as India inches its way to be the third largest economy in the world, it will not exert commensurate political influence in the world.

At home, the BJP will continue its authoritarian march though it faces a tough political challenge in West Bengal. It will have to rely much on the Special Intensive Reservation (SIR) of electoral rolls, and intangible manipulation of the election system to maintain its grip on the country’s political machinery.