On Sunday, India released its 2026 budget, offering the clearest articulation yet of how Indian Prime Minister Narendra Modi plans to navigate a world shaped by U.S. protectionism and intensifying great-power competition.
In a speech to India’s parliament, Finance Minister Nirmala Sitharaman said that today trade and multilateralism are “imperilled,” and that “access to resources and supply chains” is disrupted. Her budget is a bulwark against such disruption, entailing record infrastructure and defence spending, support for exporters, and a manufacturing push in seven strategic sectors, including biopharmaceuticals, semiconductors, and textiles. The budget also includes funding to expand rare-earth mining, processing, and manufacturing, evidence of India’s intent to reduce its dependence on China.
Sitharaman estimated that India’s debt-to-GDP ratio for the 2026–27 fiscal year will be 55.6 per cent, a slight decrease compared to last year. India's GDP is expected to grow by 7.4 per cent in the fiscal year ending in March.
Rahul Gandhi, a key opposition figure, said the budget was “blind to India’s real crises,” namely, youth unemployment, low household savings, and “looming global shocks.”
One deal after another
The day after the budget reveal, Trump said on social media that he spoke with Modi, “one of [his] greatest friends,” and agreed to a tentative trade deal that will see U.S. tariffs on Indian goods lowered to 18 per cent.
In return, India will buy US$500 billion worth of American energy, technology, and agricultural products, stop buying Russian oil, and eliminate “all tariffs and non-tariff barriers” aimed at the U.S., according to Trump. Modi said he was “delighted,” but did not elaborate on the details of the deal.
U.S.–India trade totalled around US$212.3 billion in 2024.
The deal is, of course, good news for India, but it won’t stop New Delhi’s efforts to diversify trade and investment. Trump is an impatient negotiator: he complained in June about China “totally violating” its trade deal with the U.S. and recently raised tariffs on South Korea for “not living up to” a deal announced last year. Trump’s hollowing-out of the Canada–United States–Mexico Agreement — which he previously called the “best agreement we’ve ever made” — is further evidence of the fragility of such deals.
Ministers on the move
The release of India’s budget coincides with a flurry of international engagement, including a call between Canadian and Indian foreign ministers on January 26.
India's Energy Week, running from January 27–30, highlighted India’s push to diversify its energy suppliers. Canada played a key role in this respect: energy minister Tim Hodgson’s trip to India last week opened the door to increased exports of Canadian crude and LNG, deeper co-operation on critical minerals, and progress towards a major uranium agreement. That deal, worth up to US$3 billion, could be finalized during Canadian Prime Minister Mark Carney’s March trip to India.
Preparations are also now underway for the February 16–20 India AI Impact Summit, which is expected to draw tens of thousands of guests, including leaders and ministers from around the world. Canada’s artificial intelligence minister, Evan Solomon, is attending the conference; India's national security adviser, Ajit Doval, is reportedly visiting Canada in the coming days. Additionally, 21 Canadian university presidents are on a February 2–6 visit to India.
Clearly, the new year has breathed new life into the Canada–India relationship, spanning AI, critical minerals, education, energy, security, and more. Taken together, Ottawa and New Delhi appear to be laying the groundwork for a broader reset ahead of Carney’s upcoming trip to India — the first visit by a Canadian leader in eight years.
