India’s New Equation: Economy and Foreign Policy in Balance
By Sanjeev Oak
Facing tariff threats from Washington over discounted Russian crude, New Delhi has stood firm. By prioritising energy security and affordable fuel, India signals it will not compromise sovereignty — even as its economy gains credibility with a rare ratings upgrade.
Over the past few weeks, Washington has attempted to tighten the screws on New Delhi, citing India’s growing imports of Russian crude oil. Yet the Indian response has been unambiguous: there will be no compromise on energy security. For a government battling inflation and ensuring affordable fuel for its people, cheap Russian oil remains a cornerstone of economic stability.
The Oil Question
The US has threatened tariffs and penalties, but India has held its ground. Far from scaling back, crude imports from Russia have actually risen. Fresh data from Kpler show that in August, India raised its Russian crude purchases to nearly 2 million barrels per day, up from 1.6 million bpd in July. In fact, 38 per cent of the 5.2 million barrels imported daily in the first half of August came from Russia.
“Cheap Russian crude has been the single biggest cushion against inflationary shocks.”
This surge in imports came despite the Trump administration’s July 2025 tariff announcement, underscoring India’s intent. The irony, however, lies in America’s own actions. Even as Washington lectures New Delhi, it has quietly expanded imports from China, the world’s top buyer of Russian oil. The double standards are hard to miss.
Rating Upgrade Amid Turbulence
Lost in the din of tariff threats was a milestone announcement: global rating agency S&P upgraded India’s sovereign rating for the first time in 18 years. The timing was significant — at a moment when fears abounded that US tariffs could dampen exports, global investors were signalling renewed confidence in India’s resilience.
The stock markets too held steady. While volatility rattled global bourses, Indian equities stayed relatively stable. For New Delhi, this has been a rare convergence of diplomatic defiance and financial credibility.
The Russian Cushion
Since 2022, discounted Russian crude has proved a windfall. It has helped keep domestic fuel prices stable and inflation below the 7 per cent threshold. Lower import bills reduced pressure on the dollar and, by extension, kept the rupee relatively steady.
Indian refiners, meanwhile, re-exported processed fuels to Europe and Asia, easing the energy crisis in the West. For ordinary citizens, stable diesel prices shielded rural economies from shocks. Industrial firms benefited from lower input costs, boosting sectors from steel and cement to chemicals.
“The biggest winner from Russian oil has been India’s growth story — steady at over 7 per cent.”
The IMF and World Bank now project that by 2030, India will be the world’s third-largest economy. Already in 2025, the World Bank estimates that 16 per cent of global growth will come from India.
Strategic Autonomy, Not Alignment
India’s defiance is not about Russia alone. It reflects a deeper recalibration of foreign policy. New Delhi today maintains defence cooperation with the US, trade talks with Europe, investments in the Gulf, and an active role in the Indo-Pacific. At the same time, it sustains long-standing ties with Moscow, Central Asia, Africa and West Asia.
Prime Minister Narendra Modi’s decade-long emphasis on a multipolar world has translated into practice. India rejects sanction-driven diplomacy; instead, it pushes collaboration on growth, climate change, counter-terrorism and investment.
“India is not aligning with any single bloc — it is aligning with its own interests.”
This framework combines philosophy with pragmatism. While the principle may be rooted in Vasudhaiva Kutumbakam, the operational priority is clear: national interest first.
America’s Strategic Anxiety
Washington’s Indo-Pacific strategy hinges on India as a counterweight to China. Yet, by raising the Russian oil issue, the US also seeks to restrain India’s economic ascent. A self-reliant India with steady growth, affordable energy and rising global influence challenges America’s post-Cold War monopoly.
For New Delhi, however, the equation is straightforward: battling China on the Himalayan frontier requires affordable oil far more than rhetorical lectures from Washington.
Lessons from the Past
This is not the first time India has faced external pressure. In 1974, sanctions followed its nuclear test; in 1998, nuclear explosions again invited punitive action. Each time, India chose self-reliance over submission. And each time, the world eventually accepted its choices.
The pattern continues in 2025. India is willing to absorb diplomatic heat, even tariff pain, but it will not yield on sovereign policy.
A New India
India’s posture today reflects a matured economy and confident diplomacy. It can endure American pressure but will not allow its economic roadmap or strategic autonomy to be dictated from abroad.
In the long arc of history, this moment marks the consolidation of a new India — one that embraces global interdependence but insists on sovereign independence.
“This is the New India: ready to engage the world, but unwilling to be cornered.”