Stock indices Sensex and Nifty anticipated to open with a modest increase
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India's foreign policy is currently navigating challenging waters, particularly with regards to U.S. tariffs and its relationship with China. The core elements of India's policy—close ties with the U.S., parity with China, and managing Pakistan—are under stress.
The U.S. administration has imposed a 25% tariff on many Indian imports, with threats of increasing it to 50%, affecting nearly 20% of India’s exports. This includes textiles, diamonds, shrimp, machinery, and auto parts, causing short-term economic losses for India. The U.S. has also threatened tariffs tied to India’s continued imports of Russian oil, aiming to pressure India to reduce support for Russia amid the Ukraine conflict.
In response, India has emphasised a policy of "self-reliance" to reduce overdependence on both the U.S. and China and bolster domestic industries.
Tensions with China remain high, with a backdrop of border standoffs and economic friction. China has enacted measures since early 2025 to restrict India’s manufacturing sector by curtailing the export of high-tech machinery, engineers, and rare-earth minerals crucial for India’s electronics, solar panel, and electric vehicle industries.
The rivalry with China has intensified since 2017 with ongoing border disputes and military standoffs, making China a central challenge in India’s foreign and security policy.
In the financial markets, Indian shares are expected to open slightly higher on Monday. Meanwhile, U.S. stocks rose on Friday, adding to the week's strong performance. The Dow added half a percent, the S&P 500 gained 0.8 percent, and the tech-heavy Nasdaq Composite climbed 1 percent, reaching a new record closing high for a second day. European stocks ended mixed on Friday, with France's CAC 40 rising 0.4 percent and the German DAX and the U.K.'s FTSE 100 both finishing marginally lower. Crude oil prices traded lower ahead of U.S. President Trump's scheduled meeting with Russian President Vladimir V. Putin.
Gold declined as traders await more clarity on U.S. tariff policy on Swiss gold. Asian stocks were mostly higher this morning, with Japanese markets closed for a holiday. The pan European STOXX 600 edged up by 0.2 percent. Defense stocks underperformed following reports of U.S. and Russian officials working on a deal to stop the war in Ukraine.
The Standing Committee on External Affairs, headed by Congress MP Shashi Tharoor, will be briefed today. The focus remains on upcoming Chinese retail sales and industrial output data. A U.S. tariff deadline on China is due to expire on Tuesday, with analysts expecting the core inflation to rise at an annual pace of 3.0 percent in the U.S. CPI data to be released on Tuesday.
Apple has committed to investing an additional $100 billion in U.S. manufacturing, while President Trump warned U.S. courts against striking down his tariff policy. The dollar index is steady after slipping nearly half a percent last week.
In summary, India’s foreign policy is at a critical juncture, with its traditional balancing act under strain due to economic pressures from the U.S. and geopolitical and economic rivalry with China. The situation puts India in a position where it must prioritise self-reliance and diversification of partnerships to maintain economic stability and security.
- The U.S. tariffs on Indian imports are not only affecting the country's economy, but they are also driving discussions in the world of finance and investing. Investors are closely watching how the situation unfolds, as the tariffs could impact a significant portion of India’s exports.
- The escalating tension between India and China extends beyond politics and security, reaching into the realm of technology and business. China's restriction on the export of high-tech machinery and rare-earth minerals to India can impact the growth and development of Indian industries, such as electronics, solar panel, and electric vehicle sectors.
- The current state of India's foreign policy, particularly its relationship with the U.S. and China, is sparking widespread interest in the general news. As India navigates these challenges, the world watches to see how the country will respond, maintain its traditional alliances, and secure its economic and security interests.
