India Economy on the Brink of Crisis A Nation Heading Toward Collapse
New Delhi is reeling from one shock after another. While India aspired to stand among global economic powers, the 25% U.S. tariff imposed on August 1, 2025, has shaken its economy to the core. The export sector has been directly hit, the Indian rupee plummeted to its lowest level in minutes, and the stock market has plunged into a severe downturn. Additionally, U.S. threats of further economic sanctions for maintaining trade ties with Russia, coupled with China’s decision to halt the supply of rare earth materials, have raised serious questions about India’s industrial and defense security.
The immediate effects of the U.S. decision are already visible. Even before the tariff’s implementation, the Indian rupee came under pressure, falling to 87.74 per dollar on Wednesday—its lowest level in five months. On Thursday, chaos erupted at the Mumbai Stock Exchange as the Sensex dropped 600 points within the first 15 minutes, resulting in a loss of nearly ₹5 lakh crore for investors. Industries such as textiles, pharmaceuticals, steel, jewelry, and auto parts—key sectors reliant on the U.S. market—are bearing the brunt of this crisis.
Simultaneously, the U.S. has warned India of further penalties if it does not halt oil and defense purchases from Russia. Over 40% of India’s crude oil imports come from Russia at discounted rates. If these are restricted, India will be forced to buy oil at higher prices, increasing pressure on its currency and sparking a new wave of inflation. A significant portion of India’s defense equipment also relies on Russian cooperation, and potential sanctions could not only disrupt military preparedness but also render the “Atmanirbhar Bharat” (self-reliant India) slogan hollow.
The third and perhaps most severe blow comes from China, which has stopped supplying rare earth materials critical for electronics, electric vehicles, battery technology, radar, missiles, and green energy equipment. While India has some domestic production of these materials, it lacks the technology and immediate alternatives for processing them. This restriction is severely impacting Indian industries, and several defense technology projects risk stalling.
These three factors—U.S. tariffs, Western pressure to sever trade with Russia, and China’s rare earth supply ban—have created an economic vortex that could engulf India’s growth aspirations in the near future. Over the next few years, India’s exports will be heavily affected as access to U.S. markets shrinks. If India continues energy and arms purchases from Russia, it risks further financial sanctions, putting additional strain on its dollar reserves. The rare earth ban from China, a critical raw material for India’s technology, defense, and electronics industries, could slow industrial growth over the next five years.
Ordinary Indian citizens will bear the heaviest burden of this shifting economic landscape. Prices for petrol, mobile phones, computer chips, electric vehicles, and essential medicines are expected to rise sharply. Inflation will erode the middle class’s lifestyle, and those who once dreamed of small businesses, household savings, and educational advancement now face the prospect of debt, unemployment, and rising taxes.
In the coming years, basic sectors like education, healthcare, housing, and employment will become increasingly out of reach for the average citizen. Job opportunities for the youth are rapidly disappearing, and existing jobs are becoming precarious. If this situation persists, India will not only face economic stagnation but also a rapid unraveling of its social fabric.
In this scenario, it is imperative for India to urgently revise its industrial policies, mend economic ties with China, and take practical steps to establish a new balance in diplomatic and trade relations with the U.S. Otherwise, the slogan of being the “world’s fifth-largest economy” will become a relic of the past, read only in history books by future generations.
Read More
Medvedev’s Dangerous Words: India and Russia Economic Isolation