India enters 2025 with elements of continuity and change. Prime Minister Narendra Modi leads a new coalition government in New Delhi. The world’s largest democracy remains one of its fastest-growing big economies. And New Delhi continues to pursue a multi-aligned foreign policy. However, the country faces new political demands, economic pressures, and strategic challenges, which create opportunities and constraints for India-Canada relations.
The 2024 general election and its implications for 2025
In June 2024, every survey predicted the ruling Bharatiya Janata Party (BJP) would return to power in India’s massive general election. Indeed, many endorsed the party’s boast that it could secure 400 of the 543 seats in parliament, giving it a supermajority. Prime Minister Narendra Modi retained his post, his third victory since 2014, and the BJP largely maintained its national vote share. However, the party lost 60 seats, and thus its parliamentary majority, forcing it to rely on regional parties in the National Democratic Alliance (NDA) to win the confidence of the Lok Sabha, India’s lower house.
What explains the verdict, and how might it shape politics and policy in India in 2025?
Given the diversity of states across India’s federal system and size and complexity of its electorate, no simple explanation suffices. Nevertheless, analysts noted several general factors.
The first was the BJP’s political hubris, which weakened the unity of the sangh parivar—the family of Hindu nationalist organizations. Claims by the party brass that it was no longer dependent on the support of the Rashtriya Swayamsevak Sangh (RSS), the parent organization, antagonized its leadership. The RSS’s foot soldiers, meanwhile, complained that the BJP had taken them for granted. Astonishingly, the party lost seats in the political bastion of Uttar Pradesh, including the city where, months earlier, Modi had consecrated the foundation of a Ram temple, a longstanding demand of Hindu nationalists.
Second, stark communal appeals during the campaign by the prime minister fanned mounting anxieties over militant Hindu nationalism among enough voters.
Finally, persistent underemployment and high inflation had created precarious circumstances for millions of citizens. The Indian National Developmental and Inclusive Alliance (I.N.D.I.A), led by the Congress party under the rejuvenated leadership of Rahul Gandhi, convinced enough Dalits, Muslims, and lower backward castes in battleground states that a BJP supermajority in parliament would allow it to undermine constitutional protections for minority rights and job quotas in the public sector.
The impact of the 2024 verdict on politics and policy in 2025
The BJP’s ability to dominate political life has not diminished. Senior BJP figures retained the most important cabinet posts, and the party is still the largest in the NDA and parliament by a large margin.
Nonetheless, the outcome punctured the BJP’s and Modi’s aura of invincibility and raised questions about whether the prime minister, who had never shared executive power, could manage a national coalition government.
The new government has made some amends within the sangh parivar. It upgraded the security detail of RSS chief Mohan Bhagwat and removed a ban on its members joining the civil service. The government also consulted its affiliated labour and agricultural lobbies in formulating the July 2024 budget. An early 2025 test of this relationship will be the election in February of a new BJP president, which may elevate Nitin Gadkari. Gadkari is a former cabinet member with close ties to the RSS and good relations with the business community, but who fell out with Modi in 2022.
Another possible challenge for the BJP, especially its ability to manage relations with its NDA allies, are fiscal in nature. Critical regional allies have demanded concessions, such as the Janata Dal (United)/JD(U), based in relatively poor Bihar, which sought US$3.6 billion in special financial assistance for the state. Similarly, the Telugu Desam Party has asked for US$12 billion to help build a new state capital in Andhra Pradesh. The need to concede important ministries to coalition allies also forced the BJP to shelve plans to create ‘superministries’ to streamline work. And it has created uncertainty over the contentious issues of land and labour. Well-designed policy reforms in both domains are critical to boost the country’s manufacturing sector and to realize its green transition.
Some independent political institutions, which had lost or relinquished much of their authority over the last decade vis-à-vis a powerful executive, have reclaimed some of it over the last few months. For example, there have been interventions by India’s Supreme Court to protect minority rights, blocking three BJP-governed states from demanding shop owners list their names outside along Hindu pilgrimage routes, and ruling that state authorities cannot demolish homes of individuals accused of crimes without due process, a practice that disproportionately targeted Muslims. The Court finally granted bail to senior leaders of the opposition Aam Aadmi Party (AAP) who had been jailed on controversial grounds before the 2024 general election. Two important rulings declared that parliament could not trespass on states’ legislative powers, reaffirming the federal division of powers.
Despite these pressures and constraints, however, the BJP under Modi remains a dominant political force. Indeed, in state elections, which remain a key battleground, the BJP has recovered some ground. The party retained control of the northern state of Haryana in an extremely tight contest, despite agrarian distress, mass unemployment, and corruption, thanks to its superior ground campaign, alliance-making, and the vicissitudes of the first-past-the-post system. The BJP-led coalition also swept the state election in Maharashtra, cementing its dominance in the far larger and more industrialized western state. In these state elections, the party continued to deploy its Hindu nationalist rhetoric.
What issues will shape domestic politics in 2025?
The electoral calendar in 2025 features two state contests. The first, in the National Capital Region of Delhi, pits the incumbent AAP against the BJP. The former has a dedicated party cadre and committed social base, especially poorer voters, who have genuinely benefited from its policies and programs. Hence the popular anger when its leader, Chief Minister Arvind Kejriwal, was controversially jailed before the 2024 general election on grounds of corruption. However, after 10 years in power, the AAP faces a genuine challenge from the BJP.
The second electoral contest will take place in late 2025 in Bihar, where Chief Minister Nitish Kumar of the JD(U) is expected to bid for re-election. Its main rival is the Rashtriya Janata Dal (RJD), a longstanding regional party that had previously governed the state. The Congress party will also contest. How it performs may raise questions about opposition unity and the party’s capacity to develop a new political vocabulary that resonates with shifting voting patterns.
In 2025, the national government should finally begin to conduct its long-postponed census, which will redistribute parliamentary seats for the 2029 national election, and likely generate new political fault lines. Another momentous decision will be whether the BJP conducts a caste census, a longstanding demand of many regional parties, several NDA allies, and more recently the Congress. But Hindu nationalists oppose the move since it could open fissures within the Hindu vote bank they have consolidated over the last decade.
What are the prospects and challenges for India’s economy?
Analysts predict that India could overtake Japan in 2025 to become the second-largest economy in Asia and fourth largest in the world. Some observers herald an economic boom in manufacturing, green energy, and advanced digital infrastructure.
Yet economic growth has decelerated over successive quarters. While public investment in infrastructural development has grown significantly, corporate investment and household consumption lag by a large margin. Regulatory burdens and the growing concentration of capital raise concerns of an uneven playing field. Lower revised estimates and greater policy uncertainty have encouraged foreign portfolio outflows and weakened the rupee, which has reached an all-time low vis-à-vis the U.S. dollar. Persistent high inflation has undermined real wages.
The persistent structural challenge remains inadequate job creation. The percentage of workers seeking livelihoods in the agricultural sector has grown, countering the aspiration to boost manufacturing jobs since 2014. Declining employment of unskilled and low-skilled workers, and of the ratio of workers in the labour force, reveals a capital-intensive pattern of exclusionary growth. These pressures discourage private investment and limit demand in the domestic market. Since taking office, the new NDA government contends that rapid economic growth will create nine million jobs annually in the coming years. But independent analyses dispute these claims.
What issues will shape India’s foreign policy?
India will maintain its longstanding commitment to maximizing strategic autonomy in the evolving multipolar order. Indo-U.S. relations display growing strategic congruence. That said, tensions may arise.
New Delhi is less concerned about a second Trump administration than are the U.S.’s traditional partners for several reasons. India is neither a formal ally — so largely immune to accusations of free riding — nor a genuine adversary. In fact, many in the Modi government prefer Trump’s transactional approach to bilateral relations. Yet ‘Trump 2.0’ may generate tighter constraints in some domains while alleviating pressures on other fronts.
Trump initiated the annual ‘2+2 talks’ between Washington and New Delhi, embraced the Indo-Pacific framework, revived the Quadrilateral Security Dialogue, and imposed tariffs on China. His predecessor, Joe Biden, furthered these measures, including elevating the status of the Quad. The establishment of the Initiative on Critical and Emerging Technology (iCET) in 2023, to promote collaboration in artificial intelligence, quantum computing, and semiconductors, advanced Indo-U.S. ties.
Biden hosted Modi — along with other Quad leaders — at his home in Delaware in September 2024, even after the FBI in November 2023 indicted an Indian national, Nikhil Gupta, in connection with his participation in a foiled plot to assassinate a U.S. citizen in New York City. A month after the Biden-Modi meeting, a former Indian government employee, Vikash Yadav, was also formally indicted in connection with the alleged plot. This month, the high-level committee established to investigate the U.S. allegations stated that a government official was involved, without naming anyone. It recommended "expeditious legal action against an individual" and "functional improvements in systems and procedures... [and] steps that could strengthen India’s response capability, ensure systematic controls and coordinated action in dealing with matters like this.”
S. Jaishankar’s recent visit to Washington, D.C, and Biden National Security Advisor Jake Sullivan’s visit to New Delhi in early January, underscore the centrality of advanced technological co-operation for both countries, from space co-operation to nuclear energy, for both civilian and military purposes.
Despite New Delhi and Washington’s shared concerns over China, New Delhi will strive to stabilize relations with Beijing. The agreement reached in October 2024 to patrol the disputed Line of Actual Control has momentarily de-escalated tensions since violence erupted in 2020. Moreover, India’s aspirations to compete with China in manufacturing makes it hard simply to impose restrictions. Indian conglomerates increasingly rely on Chinese inputs, technicians, and know-how to expand their production of electric vehicles, advanced batteries, and microchips. Hence their recent calls to loosen constraints on visas and investments.
A similar balancing act informs New Delhi’s relations with Russia. Since Moscow’s 2022 invasion of Ukraine, New Delhi has imported fewer arms from Moscow, while exploring the possibility of joint weapons production with and technology transfers from Washington and Paris. Nonetheless, ties between India and Russia remain strong. Putin will visit Modi this year, and Indian purchases of new military hardware, with fewer restrictions than those imposed by the U.S., are in the cards. The two countries recently signed their biggest energy agreement, worth US$13 billion, sending half a million barrels per day of Russian crude to Indian refiners over the next decade. Trump openly admires Putin, which may create even greater scope for the Modi government to engage with Russia. Yet the U.S. has just imposed tighter sanctions on Russian oil. How the war plays out in 2025, and its ramifications for India, remains uncertain.
Other risks facing ‘Modi 3.0’ include the fallout from U.S. prosecutors charging Gautam Adani and several partners in November 2024 with allegedly paying US$250 million to bribe government officials after raising funds from American investors and banks, and obstruction of justice. The Adani conglomerate imports more coal, produces more private thermal power, and operates more ports and airports than any other company in India. His close, longstanding proximity to Modi sent political shockwaves through the country. Although many expect that the Trump administration will not pressure the Modi government to co-operate, the charges are serious.
In addition, the U.S. currently runs a US$40-billion trade deficit with India, which may lead to demands by Trump to buy more American goods. The desire to reshore manufacturing to the U.S., and crack down on immigration, could cause friction. The Modi government expects Trump to visit New Delhi during the second half of 2025 for a Quad summit. Expectations that he may seek to transform the Quad into a security pact could generate disagreements if they lead to measures that appear to antagonize China unnecessarily.
In short, Modi will invest in strengthening relations with Trump without sacrificing better ties with China, Russia, and other key partners to enhance India's strategic autonomy.
What might these developments mean for India-Canada relations?
Despite tentative signs of improvement in early 2024, the diplomatic crisis that has engulfed Ottawa and New Delhi over the last two years has only deepened. In June, the National Security and Intelligence Committee of Parliamentarians released a redacted report, claiming Indian government interference in the Conservative leadership contest that elected Pierre Poilievre. In October, Canadian Prime Minister Trudeau alleged the RCMP investigation into the June 2023 assassination of the Khalistani advocate Hardeep Singh Nijjar had uncovered a much wider conspiracy of extortion, coercion, and violence linked to India, leading to the expulsion of its high commissioner to Canada and several other diplomats. Senior Canadian officials accused Amit Shah, the Indian home minister, of orchestrating the campaign.
New Delhi rejected all these accusations outright, reportedly spurning efforts by Ottawa to co-operate. The fallout marked a stark contrast with its co-operation vis-à-vis Washington. In the U.S., law enforcement agencies remained in the lead and filed an indictment in court, leading India to arrest the accused former intelligence officer. His extradition is pending. Given the open RCMP investigation in Canada, few details have been released to date. But the gravity of the accusations fuelled violent clashes between Khalistani advocates and Modi government supporters in Brampton, Ont., and Surrey, B.C., on the 40th anniversary of the assassination of Indian Prime Minister Indira Gandhi in 1984 and the anti-Sikh pogrom that occurred in its wake. Canadian party leaders, local elected officials, and community leaders condemned the violence, which Modi called an attack on Hindus.
Bilateral relations seemed to dim further as 2024 drew to a close. India’s Enforcement Directorate alleged that colleges in Canada exploited temporary resident visas to engage in illegal human trafficking. In addition, reports that international students and temporary foreign workers from South Asia increasingly suffer hostility, racism, and blame for the affordability and housing crises illustrate the risk of wider animosity growing in society.
Commentators in India believe the resignation of Canadian Prime Minister Justin Trudeau and a probable spring federal election provide an opportunity to reset fraught diplomatic relations. In recent speeches, India’s External Affairs Minister, S. Jaishankar, noted Canada’s significance as a major resource power, and the importance of pursuing Track II diplomacy to a greater degree. At this stage it is hard to discern how a new federal government in Ottawa, whichever party wins, would address the current impasse. In principle, a change in leadership in Canada offers a window to confront recent transgressions and longstanding issues afresh.
Who becomes the next prime minister after the anticipated federal election, and whether the criminal investigations in Canada will be completed and lead to prosecution, will matter significantly. Whether the new Trump administration would be their ally or adversary, however, is an open question.
• Edited by Erin Williams, Senior Program Manager, Vina Nadjibulla, Vice-President Research & Strategy, and Ted Fraser, Senior Editor, APF Canada
