Asymmetric hedging: Mapping India’s geopolitical shift

This is a thought leadership report issued by the S&P Global Institute. This report does not constitute a rating action, neither was it discussed by a rating committee.

Recent global trade and security events, such as the Middle East conflict and the ongoing Russia-Ukraine war, are necessitating a recalibration of India’s foreign policy. Such events, alongside other changes to global trade, reinforce the view that India remains exposed to global risks. The country must reconsider its approach to strategic resource diversification and economic and security self-sufficiency to become a more dominant international player. 

Navigating the evolving global security and trade landscape

A more conditional and belligerent nature of globalization is emerging, which is likely to influence India’s outlook on its future economic growth, land and maritime border security, and demographic dividend. For now, India is in a position of economic strength; it remains one of the world’s fastest-growing major economies despite geopolitical change. 

To achieve growth and security against the changing global landscape, India must use new domestic and foreign policy levers. The Middle East conflict has exposed energy-related vulnerabilities and forced India to accelerate efforts to build domestic energy resilience. The thrust behind India’s Samudra Manthan exploration program, E20 (ethanol blending) program, domestic gas utilization and green hydrogen initiatives are live-action examples of energy sector decoupling. 

Mapping India’s geopolitical shift 

India is likely to continue to position itself as a leading power, rather than a balancing power, to convey its intent to become a more dominant international player. India prioritizes its national interest by developing as many partnerships as possible with countries across the political spectrum. It exploits global contradictions to its advantage, such as deepening ties with the US while maintaining its relationship with Russia.

S&P Global Market Intelligence has identified four pillars of Indian strategic autonomy: the “neighborhood first” policy; becoming a regional leader in Asia-Pacific; managing strategic competition with mainland China; and leading the global agenda for the world’s emerging economies. 

However, to navigate a changing world order, these four pillars must evolve.

• India’s neighborhood remains its priority, but solidifying its leadership role requires more sector-specific integration in energy, technology and security, rather than diplomatic and aid-linked patronage.

• India’s leadership role in Asia-Pacific, given its position as Asia’s third-largest economy, is being considered in more mutually beneficial ways. It aims to seek mutual defense benefits rather than being a regional guarantor of security. The country is also looking to develop mutually beneficial critical infrastructure and resource networks, rather than broad-based trade agreements. 

• India’s approach to its engagement with China will likely remain cautious, but it will be more accepting of China’s integration in global manufacturing, supply chains and investment flows.

• India’s ambition to lead emerging economies is evolving as global multilateral forums lose salience. Its approach will focus on positioning Indian objectives more deeply in the local ecosystems of these emerging economies, leveraging trade and investment arrangements.

The India-US partnership: A shift to compartmentalized cooperation

As domestic and foreign policy conditions and objectives evolve for India and the US, their partnership will become more compartmentalized. India will prioritize sectors of mutual strategic interest and zoom out on areas with structural differences. 

Efforts to negotiate and conclude the India-US Bilateral Trade Agreement should continue. Diplomatic thrust is likely to increase at the ministry-to-ministry level, to allow for the relationship to progress on a sector-specific basis with tangible outcomes. 

Although the US has dropped “Indo” from the title of Indo-Pacific Command, and the Quadrilateral Security Dialogue, a forum including the US, Japan, Australia and India, has not had a heads-of-state meeting since 2025, India-US collaboration will nonetheless continue via the Initiative on Critical and Emerging Technology (ICET), for instance. This partnership should generate semiconductor fabrication and defense coproduction projects in India. The ICET indicates India’s understanding that technology cooperation is critical to its relationship with the US, and that developing technological advantages is necessary to remain competitive. While India and the US navigate the risks posed by tariffs and sanctions from other economies, a compartmentalized collaboration on technology-related supply chains is likely to endure. 

Asymmetric hedging among emerging economies

The most notable evolution is in the fourth pillar: India’s geopolitical strategy. The country is likely to intensify its proactive integration across emerging economies in Asia, Europe, Latin America, the Gulf and Africa.  

In these areas, Indian investment is likely to champion food security, climate finance and inclusive trade to build a global coalition. Such engagement is also critical for India’s economic, trade and security objectives. 

In the coming years, India’s integration with emerging economies is likely to include an expansion of trade agreements, such as the August 2026 announcement of negotiations with the Southern African Customs Union or the conclusion in 2025 of the India-Oman Comprehensive Economic Partnership Agreement. India’s collaboration with emerging economies is likely to focus on digital diplomacy, defense exports, securing access to critical minerals and supporting development goals. 

India will be keen to export the India Stack, its proprietary digital stack, to help its peers build sovereign digital systems. This is most evident in agreements to export its Unified Payments Interface (UPI) to countries such as Peru, Sri Lanka and Colombia, supporting them in establishing independent financial inclusion systems.

Through its joint venture Khanij Bidesh India Ltd., India will pursue acquisitions and codevelopment rights for critical minerals in Latin America, as it did in 2026 for lithium with Argentina, Chile and Bolivia. Similar efforts are underway for cobalt and copper in Africa. India will likely also leverage the Indian Space Research Organisation to build, launch and share real-time satellite telemetry with its neighborhood and African nations for disaster management and agricultural monitoring.

In addition, India is looking to increase its defense exports to balance its position as a weapons importer. This is evidenced in its export of BrahMos supersonic cruise missiles to the Philippines and its supply of advanced light helicopters to countries in the Indian Ocean and Southeast Asia. 

India’s foreign policy ambitions should be complemented by domestic reforms. The country must emerge as a hub of tomorrow’s technologies to hedge against global competition. To assert its role as a leading power, the Indian economy must be buttressed by a domestic infrastructure boom. Straddling these parameters are competitive federalism and India’s approach to attract investments in the drive for global data center expansion.

In July 2026, India’s Minister of State for Power said in parliament that he expected data center capacity to grow to 26.3 GW by 2031-32. The current capacity from enterprise collocated and dedicated (owned and leased) data centers is about 1.5 GW, according to S&P Global Energy estimates. In the next decade, 5 GW of data center capacity has been committed, and an additional 6-7 GW has been announced or is in early stages. 

As data centers have evolved into critical digital infrastructure, India’s state governments have competed to attract investments through innovative policies, fiscal incentives and regulatory support mechanisms. This competition is driven by significant economic, technological and strategic benefits. 

Data centers are emerging as a distinct asset class requiring dedicated policy support around power, land, connectivity, regulatory approvals and operating costs. 

To compare state-wise policy attractiveness, S&P Global Energy analyzed 19 data center IT and IT-enabled services and global capability center policies across 11 states since 2016, covering four broad incentive categories:

• Electricity: duty exemption, wheeling, tariff subsidies, open access and deemed distribution

• Land and capital: land and capital expenditure subsidies, stamp duties, building incentives, land and right of way, connectivity, and municipal bylaw relaxations

• Operational and technical: state goods and services tax reimbursement, bandwidth, cloud, leasing support, payroll, training and skill incentives, and research and development and patenting support 

• Regulatory and ease of doing business (EoDB): single window essential service classification, self-certification and public procurement

The analysis feeds into S&P Global Energy’s Data Center Policy Attractiveness India (DCPAI), which scores and ranks state policies according to these four incentive categories.

Telangana emerges as the most attractive policy package, backed by strong electricity and regulatory incentives. Maharashtra and Uttar Pradesh have balanced incentives frameworks with an extensive package of power, infrastructure, capital and regulatory incentives. Gujarat has the most lucrative electricity and EoDB measures, which focus on attracting hyperscalers. All these states have DCPAI scores of about 50/100. 

Odisha, Haryana, Andhra Pradesh and Karnataka form the second cluster, with a diverse set of policy strategies and scores from 42 to 45. Odisha and Haryana focus on broad-based incentive strategies spanning the full project life cycle, while Karnataka has notable EoDB measures, including an Essential Services Maintenance Act cushion. Andhra Pradesh takes the overall lead in land and capital support benefits. 

Rajasthan, Tamil Nadu and West Bengal are in the final cluster, with DCPAI scores of 30-40. While Rajasthan scores best in this tier, Tamil Nadu performs well on capital expenditure support, including captive renewable infrastructure. West Bengal and Tamil Nadu score lower on electricity sector incentives. The cluster also offers relatively low operational and technical incentives and moderate-to-strong regulatory incentives. 

Total electricity demand of data centers, including heating, ventilation, air conditioning and other operational loads, is estimated to grow at an 18% compound annual growth rate at the national level.