Strong headwinds test India

INDIA is in the middle of yet another electoral cycle. States are going in for Assembly elections and the issues raised are both state-level and national. Amid the polls, the Union government hastily tried to push through contentious Bills on the women’s quota in Parliament and delimitation of parliamentary constituencies. Whatever be the outcome of these efforts, the point I wish to make is that these are major distractions from the important national issues of the day.

We are today confronted with a situation where international crises are threatening our economy. We are being warned of gas shortages leading to the closure (full or partial) of industrial units ranging from chemicals, fertilisers, ceramics, glass and textiles to the humble restaurants. The effect of the spike in oil prices is already apparent in airfares and industrial diesel, with the country holding its breath on what will happen at the fuel pumps once the elections are done.

Inflation is further creeping into most household items, with traders increasing prices as supply-side disruptions work their way into the system. Trading houses with large exposure to the Middle East are petitioning the government for relief. Our self-sufficiency in food itself is threatened by the large-scale disruption to fertiliser production and imports.

The Gulf countries are now an integral part of the global food economy. Adam Hanieh, Director of the SOAS (School of Oriental and African Studies) Middle East Institute, University of London, writes in the Financial Times: “They now shape the production and circulation of food directly, supply key chemical inputs, exporting large volumes of finished fertilisers and controlling the logistical corridors through which food and agricultural commodities move across much of the Middle East, Central and East Asia, and Africa… Famine and widening food insecurity are the foreseeable consequences of military aggression in the Gulf. That reality ought to weigh heavily on a world that has largely understood this war through the narrow lens of oil price instability.”

Do remember that all this comes in the wake of a disruptive US tariff regime from which the industry is still recovering. The Indian crude basket’s average price was $125 in March, hitting $150 at times due to the war in the Middle East. It is liable to stay elevated even if the ceasefire holds as Gulf nations have suffered major damage to their production and distribution infrastructure.

In this scenario, inflation is almost a given, unless drastic measures are taken to develop new supply lines and restore some old ones (the Russian). This calls for a diplomatic resurgence on a war footing, failing which the future looks bleak. A surge in our energy prices invariably produces a chain reaction in prices of most other commodities and services as production and transport get greatly affected. The war-related disruptions are leading to unit closures, thereby increasing unemployment. This can be seen in the recent events in Noida, where disenchanted employees are protesting and getting violent. This is a situation which can be easily used and manipulated by forces inimical to us as our economy is threatened; added to this is a diplomatic morass that we find ourselves in.

The 1999 Kargil war was decisively won by India and the mountains were cleared of foreign belligerents. India also had tremendous diplomatic support and a parallel win in foreign affairs and diplomatic relations, which I wish to highlight: During the Cologne summit in June that year, G8 — the group of eight countries — condemned Pakistan’s violation of the Line of Control (LoC) and expressed support for India. The European Union opposed the LoC violation and backed India’s efforts to maintain territorial integrity. China maintained a neutral stance and urged both sides to respect the LoC.

Under then President Bill Clinton, the US took a firm stance against Pakistan and demanded the immediate and unconditional withdrawal of Pakistan’s troops to its side of the LoC. Russia, India’s long-standing ally, stood with it diplomatically and by providing military hardware. The point is that India received widespread support and Pakistan was gradually isolated and reduced almost to a sponsor of terrorism with various sanctions.

Today, it is a different world. When America wants to hold talks with Iran, it co-opts Pakistan and its Field Marshal. Iran also agrees and accepts them. They are wined and dined at the White House and suitably given a place at the high table. The Saudis have tied up with Pakistan in a mutual security and defence pact. Pakistan hosted the Shanghai Cooperation Organisation (SCO) summit in October 2024 and continues to be a strategic hub for the Chinese Belt and Road Initiative (BRI) through the China-Pakistan Economic Corridor (CPEC).

The Islamabad-Tehran-Istanbul rail link is also being revitalised; along with the BRI, it will lead to further integration of Pakistan with China, Turkey and Central Asian countries (we, on the other hand, have lost the Chabahar port, our potential link to Iran and Central Asia). Pakistan has re-established diplomatic relations with Bangladesh and is moving fast on economic and strategic fronts with them. The Pakistanis have also been given a seat on the UNSC as a non-permanent member.

Today, we face Pakistan on our western front, China on the North and the East and Bangladesh also on the East. China keeps building infrastructure along the Arunachal Pradesh border; it is renaming places in our territory and continues to lay claim to Arunachal as well as vast tracts in Ladakh. Do remember that China and Pakistan call themselves “iron brothers” and enjoy a close “all-weather” partnership.

During the May 2025 Operation Sindoor, it was the Chinese factor at play which gave Pakistan crucial support. Why has this come about? Is it because having been chastised and facing bankruptcy, Pakistan discovered humility while we in the hubris of our economic rise chose to be transactional. Through all the recent wars and conflicts in the world, we have kept quiet (and it was supposed to be a strategic silence).

John F Kennedy said it best: “Let us never negotiate out of fear. But let us never fear to negotiate.” Somewhere the plot has been lost. We are not part of the negotiation process in the major conflict zones, but then remember that our political parties are fully engaged in Assembly elections and have no time for national and international issues. Let us hope that this storm passes and leaves us undisturbed in our isolation.