India’s Multi-alignment Play

1. India and Japan: An Economic Security Embrace

The Defence Breakthrough: Japanese Defence Minister Shinjiro Koizumi travelled to New Delhi, where he called on Prime Minister Modi and, with Defence Minister Rajnath Singh, signed a Memorandum of Arrangement on Maritime Security Cooperation that gives the Japan Maritime Self-Defence Force and the Indian Navy a structured framework for joint operations. Modi urged Japanese firms to co-develop and co-produce with Indian companies and startups under “Make in India.” India is pushing the relationship toward shared defence-industrial capacity, in continuation of the economic security cooperation that was agreed during Prime Minister Sanae Takaichi’s visit to Delhi, in July.

Trade and Technology: On the economic front, India’s Commerce Minister Piyush Goyal was in Tokyo meeting Economy Minister Ryosei Akazawa and Japanese chipmakers, where he touted $200 billion in hyperscaler commitments to India and named semiconductors, critical minerals and clean energy as priority fields for cooperation, with India expecting the domestic chip demand at roughly $150billion.

Significance: Japan is fast becoming India’s most complementary large partner: a capital rich economy de-risking from China, matched to a large market and talent pool seeking capital and know-how. The maritime pact creates an Indo-Pacific counterweight to Beijing even as India and China engage diplomatically, viz. the essence of multi-alignment.

2. India and China: A Thaw Takes Shape

The Headline: Xi Jinping is expected in New Delhi for the 18th BRICS summit on 12-13 September, (his first visit since the 2020 Galwan clash froze relations) reportedly with a delegation of around 400 officials. Beijing has not formally confirmed the trip.

The Groundwork: Two sides are engaged in confidence building measures, including an eight points consensus from the Special Representatives talks on border management and military hotlines, an agreement to resume direct flights after a five year gap, and the restoration of visas and trade links. Analysts frame the moment as a chance to give bilateral ties a fresh start, accelerated by the tariff pressure Washington applied over past year, which pushed India to widen its options.

The Caveats: A thaw is not a settlement. The boundary disagreement remains unsolved, the trade deficit with China keeps widening, and a “true” friendship remains a long shot given the residual mistrust. The risk for New Delhi is granting market access and diplomatic warmth without a durable border deal, and a backlash from US still weighing secondary sanctions on buyers of Russian energy.

3. Modi at the SCO

At the 26th Shanghai Cooperation Organisation summit in Kyrgyz capital Bishkek (31 August- 1 September, the bloc’s 25th anniversary), Indian Prime Minister met Russian President Putin to discuss defence, energy and payments. He also met Iran’s President Pezeshkian for the first time since this year’s West Asia conflict. The SCO now spans roughly 40% of world’s population and a quarter of global GDP, though it still trades more in symbolic solidarity than concrete action.

THE MACRO PICTURE

4. Liquidity Overhang

The central bank RBI’s special USD-INR swap facility (launched in June for deposits and external borrowings) proved so popular it drew $136.37 billion, prompting RBI to close the window a month early. The surplus banking liquidity swelled to the highest level in over four years. The overhang risks stoking inflation and complicating the neutral stance of the Monetary Policy Committee. Price pressures are edging toward the upper limit of central bank’s 2-6% inflation tolerance band.

5. Growth Questioned

India’s June-quarter GDP grew 7.8%, but the number arrived alongside a revamped methodology (a new producer price index and double deflation for manufacturing) and drew immediate scrutiny. Economists note the performance was largely a soft deflator effect (i.e. unusually low price-deflator flattering real growth in the primary and secondary sectors), leaving the headline vulnerable to future revisions and to doubts about how much genuine momentum it captures.

6. The Rupee Under Siege

The currency stayed on the back foot, having touched a record low near 97 per dollar, and trading down roughly 6% for the year. The RBI has been intervening almost daily across spot and forward markets, though traders read it as smoothing the pace of depreciation rather than defending a line. The cause of the weakness is oil linked importer demand and risk aversion (not capital flight).

OTHER HEADLINES

7. The AI-Jobs Debate

Goldman Sachs argued India is less exposed to AI job risk than most economies, estimating 9-17% of non-farm tasks are automatable while 42-48% of jobs would be complemented. Domestic voices were more anxious: Southern state Karnataka’s Deputy Chief Minister warned that AI could cut 50% of jobs. Karnataka is drafting a policy to shield tech workers in Bengaluru and other tech hubs in the state.

8. Investor’s Turn Cautious

Bank of America’s fund manager survey (98 investors, $272 billion, 7-13 August) ranked India Asia’s least favoured equity market, displacing Indonesia at the bottom, with 32% of respondents net underweight. Cited concern: thin listed AI exposure, softening growth, stretched valuations and a perceived reform lull; Taiwan and Japan drew the most favour.

9. India Inc’s Gold Loan Rush

With bullion prices surging and households sitting on some $5 trillion of gold, Indian financial industry is racing into gold backed lending, a near collateralized, low default business. The loan books can swell with the gold prices. Global investors have taken note. Bain Capital is cleared to buy up to 41.7% of Manappuram Finance, India’s second largest gold loan provider.

10. ISRO’s GSLV-F17

On 4 September, Indian Space Research Organisation successfully launched a geostationary imaging satellite, joining a select group of nations. This is India’s first satellite built to watch the subcontinent continuously, thus improving India’s disaster, agriculture and security monitoring.

IN SUM: Multi-alignment is buying India room abroad; the harder test is whether the domestic economy justifies the confidence.

(This report is based on information/data available as of September 10, 2026, and represents an analysis of geoeconomic trends. It is intended for informational purposes only and should not be construed as business advice.)

Disclaimer：The views expressed in this India Roundup do not necessarily reflect those of the API, the Institute of Geoeconomics (IOG) or any other organizations to which the author belongs.