India has entered 2026 facing more economic challenges than headline growth figures alone would suggest. While the International Monetary Fund (IMF) has upgraded India’s growth projections for the 2025–26 economic year to 7.3% (up from 6%), the composition and durability of that growth is increasingly hostage to external shocks, policy trade-offs, and structural constraints, especially as the global economy grows more volatile. The challenge for New Delhi is not whether the Indian economy can grow—that is clearly evident—but whether it can seize the opportunities to continue this growth in an era of global instability.
Despite being a bedrock of the economy, agriculture in India has faced a series of significant setbacks for years, leading to strikes, protests, and serious challenges to President Narendra Modi’s governing Bharatiya Janata Party (BJP). Unsurprisingly, a major part of this challenge is also the tariffs imposed by President Donald Trump, which reduced Indian food exports to the United States by as much as 40% in the middle of 2025.
That’s why it was such a welcome move from the Indian government to lift the ban on exporting rice in March last year. Already one of the world’s largest rice producers and exporters, rice exports jumped nearly 20% in 2025 after the limit on exports, originally imposed in 2022 to offset both inflating global food prices and potential scarcity due to poor yields at home, was rescinded, leading to a surge in non-basmati rice being shipped to nations including Bangladesh, Benin, Cameroon, Cote d’Ivoire, and Djibouti. For farmers, this is undoubtedly a success story: incomes have risen, and foreign exchange earnings have been bolstered.
But politics gets in the way. Rice is such a major part of the Indian economy that increased exports can come with increased instability, as tightened domestic supply means potential food scarcity, especially without the long-term growth in agricultural capacity to offset the loss. In reality, the removal of export restrictions is due to a couple of favorable harvests that by no means are the norm, and if a disruption in monsoon season this year were to reduce yields, the export ban may well be reintroduced.
What compounds this issue further is India’s major external dependence on imported energy. Energy might not be the first thing people think of when they think of food prices, but the energy costs involved in the processing and refining of fertilizers, the operation of agricultural equipment, and the transportation of raw material all work to raise the price of food. If the cost of energy rises, so too does the cost of food, both in terms of raw materials and refined food products at the end of the process.
This is part of the reason India has been courting Russia, and why Russia is so willing to be courted, over crude oil; but as a consequence of the sanctions on Russia, and recent military action in Venezuela, crude oil and imported energy is an increasingly politicized commodity in the global economy.
Which is why the efforts by Reliance Industry, India’s largest private sector conglomerate and one of the nation’s most important energy refiners, to buy Venezuelan crude oil is so significant—provided that the United States allows Venezuelan oil to be exported. Not only does such a move underline how dependent India has become on external energy, but specifically on sanctioned or discounted oil. If this is central to India’s energy calculus, it may well work to cap inflation and support national refineries, but it makes India’s economic foundations unreliable and fragile.
The risk lies in overexposure to geopolitical volatility. Indian refiners may well be experienced at circumventing global sanctions, but if the US refuses access to the Venezuelan oil deposits or clamps down hard, or if global circumstances radically shift, this could reverberate quickly through the Indian economy and drastically affect prices. The challenge facing India that lies at the intersection of its energy dependency and its unreliable food yields is the great challenge of 2026, tying India’s already fragile agricultural industry to an increasingly volatile global energy landscape.
Such an example comes in the form of the stalled trade deal with the United States. Renegotiations over the tariffs imposed by the US in the summer of last year have become emblematic of the international crossroads at which India finds itself, with the 50% tariffs imposed principally due to India’s purchasing of Russian oil. The rupee has since fallen to a historic low, which is stalling investment into the country, and threatening the wider geostrategic ambitions of the country to become a rival regional power to China.
A complex web of competing national and international interests is forcing the Indian economy into long-term stasis, even if the short-term growth is positive, and will no doubt harm the strategic goals of the country further if it is not untangled.
The post India’s Outlook was first published by the Foundation for Economic Education, and is republished here with permission. Please support their efforts.
