Engaging the Neighbourhood, Technological Collaboration and Defence Cooperation
In the past few weeks, India has engaged robustly with multilateral frameworks such as the Shanghai Cooperation Organisation and BRICS. This week, India’s external interactions were defined by engagements with countries in the neighbourhood. India sought to strengthen defence cooperation with friendly countries and to promote collaboration on advanced technologies between domestic and foreign firms.
In the Neighbourhood
India’s External Affairs Minister (EAM), S Jaishankar, visited Bhutan from 16 to 18 September 2026 and called on His Majesty the King of Bhutan and also the Prime Minister of Bhutan.[i] For decades, India has been a significant development partner of Bhutan, extending financial assistance to Bhutan’s Five-Year Plans.
India has provided significant financial and technical assistance to strengthen Bhutan’s hydropower sector. During the EAM’s visit, India agreed to provide “a concessional Line of Credit of INR 4000 crores for energy projects” and reaffirmed its support for the Gelephu Mindfulness City (GMC).[ii] Both countries are working on a host of other projects, such as strengthening UPI, railway and other infrastructure networks.
India and the United States: Growing Unease
Meanwhile, stress in India-US relations persists. On September 18, US President Donald Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 into law. The Act is enabling legislation that authorises the US president to impose 100% duties/tariffs on countries that import Russian oil and natural gas. If operationalised, the legislation is likely to adversely affect China and India, as both import significant quantities of oil from Russia.
The Indian government said it will continue to buy energy from diverse sources to meet the needs of over 1.4 billion people. The Indian government also said the US move would affect global energy markets, and that it will “take all necessary measures to protect its trade and economic interests.”[x]
There is considerable disappointment in India that, perhaps, India is being singled out for unfair treatment, as the legislation has special carve-outs for Europe’s natural gas imports from Russia. Section 113 (d) of the legislation states that a duty shall not be imposed for qualifying natural-gas imports under the specified conditions.[xi] According to European Council data, “pipeline gas and LNG combined, Russia accounted for around 12% of total EU gas imports in 2025.”[xii]
Europe
During the week, officials held meetings and events to strengthen ties between India and European countries. On September 14, the UK government and the Cellular Operators Association of India (COAI) signed an MOU to jointly “tackle online fraud, scams and harms.”[xiii] On September 20, India’s Ambassador to Belgium, Luxembourg & the European Union, Mr Pranay Verma, met the Director-General for External Policies at the European Parliament, Mr Pietro Ducci, to discuss “India-EU inter-parliamentary engagement, high-level exchanges and implementation of priorities under the India-EU Strategic Partnership.”[xiv]
Economy
India has seen rapid adoption of the Unified Payments Interface (UPI), which facilitates fund transfers between bank accounts via mobile phones. According to reports, from FY 2016-17 to FY 2025-26, UPI facilitated over 24,162 crore transactions and has emerged as the leading payment interface in the world.[xv] On September 15, the Indian government announced that a nominal fee will “apply to person-to-merchant transactions above ₹2,000,” which will be shared among payment ecosystem participants, including banks, payment service providers and UPI application providers.[xvi] Adequate care was taken to ensure that UPI payments for “railways, telecommunications, insurance, fuel and agricultural inputs, will attract a flat MDR of ₹5 per transaction.”[xvii] It is estimated that approximately “96% of all person-to-merchant transactions will remain unaffected.”[xviii]
India’s inflation numbers have increased. While the “consumer price inflation rose to 4.82% in August, from 4.45% in July; the wholesale price inflation, meanwhile, inched closer to the double-digit mark, rising to 9.92% from 9.78%.”[xix] A combination of factors, such as the rise in crude oil prices due to the Iran war and a relatively weak monsoon, may be contributing to the increase in inflation. Meanwhile, unemployment numbers held steady. According to the latest Periodic Labour Force Survey (PLFS) data, released on September 15, India’s unemployment rate stood at 5% in August. According to the PLFS survey, while there was a fall in rural unemployment rates, there was a rise in urban unemployment rates.
Recent trade statistics show that the trade deficit narrowed to a five-month low of $26.86 billion in August, down from $31.98 billion in July.[xx] The surge in exports and decline in gold imports in August contributed to the decline in the trade deficit. More specifically, on September 18, the RBI released its annual survey of software & ITES exports. The survey noted that “India’s exports of software services increased by 8.2 per cent (y-o-y) during 2025-26 to US$ 221.4 billion” and added that the US (54.1%) and Europe (31.8%) were major export destinations.[xxi] India has recently signed several free trade agreements, which are likely to further boost exports. On September 16, the New Zealand Parliament approved the legislation to implement the Free Trade Agreement with India, raising hopes of its early implementation.[xxii]
Regarding investments and collaborations, Oil India Ltd (OIL) has announced that it intends to spend INR 15,000 crore on “drilling deepwater exploration wells over the next three years.”[xxiii] News reports indicate that the Bhabha Atomic Research Centre (BARC) is in discussions with Indian private sector companies to “develop its 300MW Bharat Small Modular Reactor (BSMR) for commercial installation.”[xxiv]
Technology Collaboration
While the second week of September saw growing collaboration between India and foreign private-sector firms in the space sector, the semiconductor industry drew attention in the third week of the month. On September 16, Prime Minister Narendra Modi chaired the Semiconductor Roundtable with the CEOs of leading semiconductor companies and called for their active participation in driving rapid growth of the semiconductor industry in the country.[xxv]
Indian Prime Minister Narendra Modi inaugurated the SEMICON India event on September 17th. Noting that the India Semiconductor Mission (ISM 2.0) has a financial outlay of $13.5 billion, the PM stated that “the government has set a target to train one lakh engineering students for the semiconductor industry.”[xxvi] The India Semiconductor Mission (ISM 2.0) seeks to build a complete chip value chain and focus on six pillars, viz., “design, machines and materials, setting up new fabs, further advanced packaging, research and talent development.”[xxvii] PM Modi also noted that India is scaling up investments in the power sector to ensure energy security for the semiconductor industry.[xxviii] The SEMICON India event saw participation from ‘600 exhibitors, 300 international companies, six country pavilions and 12 state pavilions,’ along with participation of a large number of students and researchers.[xxix] According to reports, numerous MOUs were signed at the SEMICON India event, amounting to “investment commitments of around ₹1 lakh crore (approximately USD 11–12 billion).”[xxx] India has made rapid progress in the semiconductor segment with growing collaboration between Indian and foreign firms. For instance, on the sidelines of the SEMICON India event, ASML has announced that it has started operations in India in collaboration with Tata Electronics.[xxxi] Recently, leading robotics company Teradyne has opened an office in India to support semiconductor manufacturing. Speaking to the media, Ashwini Vaishnaw, Minister of Electronics and Information Technology, said efforts are underway to develop India into a global chipmaking hub with “five large semiconductor manufacturers, three major materials manufacturers, two advanced packaging facilities and more than one lakh jobs.”[xxxii]
In other technology domains, Russia’s Rosatom reportedly has begun local production of 3D printers in India.[xxxiii] On September 20, the Indian Embassy in France, in collaboration with Geospatial World, facilitated discussions between space companies and related professional associations from both countries to support technological partnerships and explore new market opportunities.[xxxiv] The Indian Air Force organised Dronathon-2026 at Pokhran (September 14 to September 16), which saw the participation of over 20 leading defence companies. The participants demonstrated their Unmanned Aircraft Systems (UAS).[xxxv]
Defence Cooperation
Despite growing unease in the India-US relationship, various initiatives aimed at increasing cooperation between the two countries have not been disrupted. For instance, the 22nd edition of the India-US joint military exercise, Yudh Abhyas, is being held in high-altitude and desert environments from September 15 to September 22.[xxxvi]
The Indian Army Chief visited Russia (from September 16 to September 18) and met with senior leaders, including Deputy Minister of Defence General Yunus-Bek Evkurov, to discuss enhanced military exchanges and cooperation between the two countries.[xxxvii] During the week, the 5th edition of the India-Myanmar Bilateral Army Exercise (IMBAX)[xxxviii], the 18th edition of the India–Mongolia Joint Military Exercise (Nomadic Elephant 2026)[xxxix] and the inaugural India–South Africa Army-to-Army Staff Talks were also organised.[xl]
The India-Japan bilateral air exercise – Veer Guardian 2026 – is currently underway in Jodhpur, India. Both countries participated with their frontline aircraft. Japan participated with F-2A fighter aircraft, while India participated with Rafale, Su-30MKI, and Light Combat Aircraft Tejas.[xli] This is the first time that Japanese fighter aircraft have operated from Indian airbases, and the Air Chiefs of both countries did a sortie in Tejas aircraft.[xlii]
On September 20, the Indian Navy’s INS Sahyadri and INS Kulish arrived at Subic Bay in the Philippines to participate in the ASEAN Defence Ministers’ Meeting (ADMM)-Plus Joint Cooperation Activity (JCA).[xliii]
Conclusion
During the week, India’s unique partnership with Bhutan stood out for its positive outcomes. India continues to engage with Nepal on disaster relief and has promised to supply electricity for a few months. On the economic front, there was an uptick in inflation, unemployment remained steady, and the trade deficit declined. The SEMICON India event proved many sceptics wrong by showing that India’s semiconductor industry is rapidly evolving. India has conducted military exercises with diverse countries such as the United States, Japan, Mongolia, and Myanmar, in addition to the Indian Army chief’s visit to Russia and Army-to-Army staff talks with South Africa. Such diverse defence engagement demonstrates that numerous countries value their engagements with Indian defence forces.
Sanjay Pulipaka is the Chairperson of the Politeia Research Foundation. The Views expressed here are personal.
This article can be reproduced provided the author and the Politeia Research Foundation receive due acknowledgement, and it is not used for commercial purposes. The copyright will remain with the Politeia Research Foundation ©️PRF.
Endnotes
[i] Ministry of External Affairs, Government of India. “Joint Press Release: Visit of External Affairs Minister of India to Bhutan (September 16-18, 2026).” September 18, 2026.
[ii] Ministry of External Affairs, Government of India. “Joint Press Release: Visit of External Affairs Minister of India to Bhutan (September 16-18, 2026).” September 18, 2026.
[iii] “FM Nirmala Sitharaman Meets Nepalese Counterpart Wagle, Discusses Flood Recovery.” The Hindu, September 18, 2026.
[iv] Ministry of Power, Government of India. “Export of Power to Nepal Approved.” Press Information Bureau, September 14, 2026.
[v] Ministry of External Affairs, Government of India. “Transcript of Bi-Weekly Media Briefing by the Official Spokesperson (September 18, 2026).” September 18, 2026.
[vi] Ministry of External Affairs, Government of India. “Prime Minister Shri Narendra Modi Receives a Telephone Call from the President of the UAE (September 18, 2026).” September 18, 2026.
[vii] Ministry of External Affairs, Government of India. “Transcript of Bi-Weekly Media Briefing by the Official Spokesperson (September 18, 2026).” September 18, 2026.
[viii] Ministry of External Affairs, Government of India. “Charge d’Affaires of the High Commission for the Islamic Republic of Pakistan in New Delhi Summoned to the Ministry of External Affairs.” September 16, 2026.
[ix] Ministry of External Affairs, Government of India. “Official Spokesperson’s Response to Media Queries on the So-Called Pakistan-China Boundary Joint Commission.” September 16, 2026.
[x] Ministry of External Affairs, Government of India. “Statement on Passage of the Sanctioning Russia and Iran Act in the US Congress.” September 17, 2026.
[xi] U.S. Congress. Sanctioning Russia and Iran Act. H.R. 5334, 119th Cong. U.S. Government Publishing Office.
[xii] European Council / Council of the European Union. “Where Does the EU’s Gas Come From?” April 13, 2026.
[xiii] UK in India (@UKinIndia). X (formerly Twitter) post. September 15, 2026.
[xiv] Embassy of India, Brussels (@IndEmbassyBru). X (formerly Twitter) post. September 20, 2026.
[xv] Press Information Bureau, Government of India. UPI: Transforming India’s Payment Landscape. August 24, 2026.
[xvi] Ministry of Finance, Government of India. “UPI Continues to Remain Free for Peer to Peer Transactions and 96% of Merchant Transactions.” Press Information Bureau, September 15, 2026.
[xvii] Ministry of Finance, Government of India. “UPI Continues to Remain Free for Peer to Peer Transactions and 96% of Merchant Transactions.” Press Information Bureau, September 15, 2026.
[xviii] Ministry of Finance, Government of India. “UPI Continues to Remain Free for Peer to Peer Transactions and 96% of Merchant Transactions.” Press Information Bureau, September 15, 2026.
[xix] Subhash Narayan and Banikinkar Pattanayak, “Rising inflation sparks buzz of early rate hike,” The Mint, September 15, 2026.
[xx] “Goods Exports Up 26% in August, Trade Deficit Eases: Engineering, Petroleum Products, Chemicals and Textiles Lead Shipments; US Remains Top Market.” Economic Times, September 16, 2026.
[xxi] Reserve Bank of India. “Survey on Computer Software and Information Technology Enabled Services Exports: 2025-26.” RBI, September 18, 2026.
[xxii] “New Zealand Parliament Passes India Trade Deal, Cutting Tariffs on Most Exports.” Reuters, September 16, 2026.
[xxiii] Mathur, Shubhangi. “Oil India to Spend ₹15,000 Crore over 3 Years for Drilling Deepwater Wells.” Business Standard, September 17, 2026.
[xxiv] Rituraj Baruah, “BARC taps industry for small reactors,” The Mint, September 17, 2026.
[xxv] Prime Minister’s Office, Government of India. “PM Chairs Semiconductor Roundtable with Leading CEOs.” September 16, 2026.
[xxvi] Prime Minister’s Office, Government of India. “PM’s Speech during the Inauguration of SEMICON India 2026.” September 17, 2026.
[xxvii] Ministry of Electronics and Information Technology, Government of India. “India Building Semiconductor Future.” Press Information Bureau, September 17, 2026.
[xxviii] Prime Minister’s Office, Government of India. “PM’s Speech during the Inauguration of SEMICON India 2026.” September 17, 2026.
[xxix] Press Information Bureau, Government of India. “Silicon Dreams.” September 15, 2026.
[xxx] Ministry of Electronics and Information Technology, Government of India. “Semicon 2.0 to Deepen India’s Semiconductor Ecosystem with Focus on Design, Equipment, Fabs, Advanced Packaging, R&D and Talent.” Press Information Bureau, September 17, 2026.
[xxxi] Anand, Akriti. “ASML Enters India: What Does Its Tata Partnership Mean for Country’s Semiconductor Ambitions?” Mint, September 21, 2026.
[xxxii] “5 Large Chipmakers, 1 Lakh Jobs: Ashwini Vaishnaw on India’s Semiconductor Goal.” India Today, September 18, 2026.
[xxxiii] “Rosatom Localises 3D Scanner in India, Cuts Equipment Costs by 40%.” ET Manufacturing (Economic Times), September 15, 2026.
[xxxiv] Embassy of India, France (@IndiaembFrance). X post. September 20, 2026.
[xxxv] Ministry of Defence, Government of India. “Indian Air Force Dronathon – 2026.” Press Information Bureau, September 14, 2026.
[xxxvi] Aishwarya Singh, “India, US Forces Train Together in ‘Yudh Abhyas’ to Tackle High-Altitude, Drone Threats.” NDTV Profit, September 19, 2026.
[xxxvii] Embassy of India, Moscow (@IndEmbMoscow). X post. September 18, 2026.
[xxxviii] Additional Directorate General of Public Information, Indian Army (@adgpi). X post. September 15, 2026.
[xxxix] Additional Directorate General of Public Information, Indian Army (@adgpi). X post. September 21, 2026.
[xl] Additional Directorate General of Public Information, Indian Army (@adgpi). X post. September 19, 2026.
[xli] “India, Japan Conduct Air Exercise ‘Veer Guardian 2026’ at Air Force Station Jodhpur.” News on Air (Akashvani), September 20, 2026.
[xlii] “Japan Air Force Chief’s Tejas Sortie ‘Clear Example’ of Trust in Aircraft: Air Chief Marshal.” The Hindu, September 20, 2026.
[xliii] Indian Navy. “Indian Naval Ships Sahyadri and Kulish Arrive at Subic Bay, Philippines for ADMM-Plus JCA.”
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