Shocks to shields: How India fortifies itself against a turbulent world

When New Delhi hosted the AI Impact Summit from 16-20 February, it looked, at first glance, like a familiar exercise in “Global South leadership”: flags, panels, ministerial photo-ops and aspirational language about inclusive technology. Yet the summit’s architecture — framed as a five-day, full-stack event with themed “Sutras” and working-group “Chakras” and billed as drawing participation from over 100 countries — signals something more consequential than conference diplomacy. It is part of a broader shift in how India is now hedging in a harsher world.

For decades, India described its foreign policy as “strategic autonomy”: a doctrine meant to avoid entrapment and preserve room to manoeuvre. Today, the same behaviour is better understood through a different metaphor. India is no longer merely trying to remain unaligned; it is managing exposure. 

What used to be framed as autonomy is now closer to portfolio management — diversifying across partners, buying options and constantly rebalancing against tail risks. Four shocks have increased the correlation across India’s major risks — US transactionalism, two-front security pressure, Pakistan’s strategic rehabilitation and China’s institutional penetration of South Asia — forcing India to hedge across multiple “asset classes” at once.

The first shock is the “tariffisation” of the US relationship: the replacement of a trust premium with transactional coercion. In 2025, the trigger was not a classic trade dispute but a geopolitical one — Washington reframing India’s discounted Russian oil purchases as a strategic issue and binding that choice to punitive tariffs. India immediately protested the measures as “unfair, unjustified and unreasonable”.

Almost a year of tariff threats and trade negotiations culminated in a February 2026 “stage-by-stage” trade framework that reduced the rate to 18% (which now hangs in the balance after the US’s Supreme Court ruling on Trump tariffs), but its ambiguous language and the domestic protests it triggered among Indian farm unions revealed a deeper truth: the US partnership could now be priced and repriced at will. Strategic autonomy assumed partners could be compartmentalised; tariff threats fuse economics, energy and geopolitics into a single blended risk.

The second shock came in May 2025, when a four-day India-Pakistan crisis became a brutal systems test. Pakistani sources claimed multiple Indian aircraft were shot down, with US officials later confirming that Chinese-made J-10 fighters had been involved. Whether or not every claim was accurate, the international narrative was fixed: India’s airpower had been challenged, and its assumptions about escalation dominance needed revision. More troublingly, the crisis exposed how quickly information warfare and third-party mediation — particularly by the US — could compress India’s decision space. If the western border can ignite at speed, India has a powerful incentive to reduce risk elsewhere — especially along the China frontier.

The third shock is Pakistan’s strategic rehabilitation, which alters the deterrence and diplomacy environment India long took for granted. Washington’s renewed attention sharpened the shift: Trump’s June White House meeting with Chief of Army Staff Asim Munir, without civilian counterparts — reported as unusually direct — signalled a functional return of Pakistan as an interlocutor on regional security. Months later, following Israel’s attack on Qatar, Saudi Arabia and Pakistan — a de facto nuclear state — signed a mutual defence agreement, formalising a security partnership and potentially extending a nuclear umbrella that Gulf states had previously maintained only informally. For India, the implications were double-layered: not only did Pakistan gain new strategic weight and leverage, but India’s own Gulf economic agenda now had to compete with a formalised security competitor.

The fourth shock was China’s quiet institutional penetration of South Asia. Beijing deepened the trilateral dialogue with Pakistan and Afghanistan in Kabul in May and August with discussion to extend the China-Pakistan Economic Corridor into Afghanistan, and meanwhile inaugurated another with Pakistan and Bangladesh in Kunming in June. These trilaterals on the two flanks of India, together with China’s growing economic and security ties with Sri Lanka, Maldives, Nepal, from the maritime front, are strategically circling and hence shaping India’s strategic calculations and behaviours. India has been out-piped in its own neighbourhood.

Against these shocks, India’s first hedge is a selective thaw with China. Since October 2024, when a patrol agreement ended a four-year border standoff, India has moved methodically: restoring visas for Chinese citizens, reopening direct flights and even considering the relaxation of procurement curbs on Chinese firms. This is not trust; it is duration management that lowers the probability of simultaneous China and Pakistan crises while restoring economic functionality where Chinese inputs remain bottlenecks. By doing this, India buys itself breathing room.

The second hedge is institutional re-engagement with China-Russia-led groupings. In late 2025, Prime Minister Modi attended the Shanghai Cooperation Organisation summit in China — his first visit since the border tensions began. India has since taken up the BRICS presidency for 2026, with the Reserve Bank of India quietly proposing the linking of BRICS central bank digital currencies for cross-border payments, a potential reference to China’s CBDC, the only and most mature such mechanism within the BRICS members. This is clearly a signal to the US, to the very sensitivity of Trump on BRICS’s monetary and financial challenge to US dominance.

The third hedge is home-field convening. The AI Impact Summit was explicitly branded by India as the first Global South-hosted governance-and-industry AI mega-event for the Global South agenda, convening the two AI superpowers US and China, along with UN agencies and dozens of countries. By hosting the rule-shaping conversation, India elevates itself as a Global South leader into the future-defining US-China AI competition — a subtle but real form of strategic collateral.

The fourth hedge is the fastest: a free trade agreement (FTA) network built at remarkable speed. Since mid-2025, India has finalised or significantly advanced trade deals with the UK, the EU, Oman, the European Free Trade Association EFTA states and New Zealand, while restarting talks with the Gulf Cooperation Council. These deals are not just about export growth; they are portfolio instruments that reduce concentration risk and create leverage when the US relationship can be repriced overnight.

None of this hedging is costless. Thawing with China invites domestic hawk criticism. Deepening BRICS ties draws US scrutiny. FTAs provoke farmers and small businesses. But in a world where partners can become tariffs overnight, the only autonomy that survives is the autonomy you can rebalance. Doctrines are speeches. Portfolios are structures. And right now, India is quietly replacing speeches with structures.

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