Newsmakers of the Year 2025 | Narendra Modi & Donald Trump: The Mover & The Shaker

At the start of 2025, the compulsions that drove Narendra Modi and Donald Trump were similar. Both were seen as strongmen who had entered uncharted political territory in their respective countries. With both over 70 years old, the quest for them was less about political survival and more about establishing a lasting and impactful legacy.

Modi, 75, created electoral history when he won a third consecutive term in the 2024 general election, equalling the record set by India’s first prime minister, Jawaharlal Nehru. With one difference, though. Unlike the Congress under Nehru, the Modi-led Bharatiya Janata Party (BJP) in its third term failed to secure a simple majority on its own in the Lok Sabha, winning only 240 out of 543 seats, 32 short of the requisite target of 272. For the first time in his decade-long premiership, Modi had to depend on key allies—Chandrababu Naidu’s Telugu Desam Party and Nitish Kumar’s Janata Dal (United)—of the National Democratic Alliance (NDA) to form the government. It could have cramped his ability to undertake bold and decisive reform. But Modi did not allow that setback to deter him in 2025, embarking on reforms that would put India firmly on the trajectory of a Viksit Bharat, joining the exclusive league of developed countries by 2047, the 100th year of its Independence.

In the United States, the then 78-year-old Donald Trump made a remarkable comeback in the November 2024 presidential election when he became the first American president in 132 years to win non-consecutive terms. And he did so emphatically, cornering 312 of the 538 electoral votes, way ahead of the 270 needed to be President. His victory was seen as part of the deep demographic and cultural backlash of White Christian nationalists against what they perceived as the rapid establishment of a multi-racial, multi-religious America under the tenures of Democratic presidents like Barack Obama and Joe Biden. Apart from carrying 31 of the 50 states, the Trump-led Republican Party won majorities in both the powerful Senate and the House of Representatives, arming him with enough political ballast to execute his controversial vision of how to Make America Great Again (MAGA) in his second term.

As the world entered the final year of the first quarter of this century, the paths taken by Modi and Trump to achieve their respective goals would not just cross each other but end up being at cross-purposes with each other in more ways than one. By the end of the year, the friction would fray the Indo-US relationship that had in the past two decades overcome the hesitations of history to become stronger. That said, despite the obvious tensions in Indo-US ties, both Trump and Modi would maintain the faade that they remained, in the US president’s words, “good friends”. That fraught ‘friendship’ would dominate India’s domestic and foreign policy discourse throughout 2025, even if it did not bring any obvious benefit to either country.

MODI’S REFORM EXPRESS

When 2025 dawned, it didn’t appear that things would go so wrong between the two leaders, with both hard-focused on domestic economic reform. The BJP’s massive victory in Maharashtra in the November 2024 assembly election had helped Modi regain his mojo and push the throttle on what he called his ‘Reform Express’. Its first indication came on February 1, when finance minister Nirmala Sitharaman in her budget gave middle-class taxpayers major concessions by raising the nil-tax liability ceiling from Rs 7 lakh to Rs 12.75 lakh per annum. Nearly 10 million individuals, or over a third of India’s taxpayers, stood to benefit from that move, as they found more money in their hands to spend on goods and services.

The Budget also indicated a big shift in the economic priorities of the Modi government. While in the past it had focused largely on supply side economics by pumping vast amounts of public money into building infrastructure for energy and transport, 2025 saw it take significant measures to boost demand and consumption. The hope was that it would stimulate private investment in manufacturing and services and create more jobs. As an expert who wished to remain anonymous explained, “The diagnosis of why the BJP didn’t win a parliamentary majority on its own was jobs, jobs, jobs. Reforms then became the cure, and the urgency to implement became an imperative in 2025. It was now or never for the Reform Express.”

Another major step came in September when the Modi government pushed through the long-awaited and much-needed rationalisation of the Goods and Services Tax (GST). By simplifying the process and pruning slabs from five to three, the government made it clear that it was willing to forgo revenue to stimulate consumption. The Reserve Bank of India (RBI) backed the government’s intentions, significantly lowering its repo (repurchase) rate for lending short-term funds to commercial banks by as much as 1.25 basis points in 2025 alone, bringing it down from 6.50 per cent to 5.25 per cent, enabling banks to lower their lending rates to both businesses and homes. The second quarter of the financial year saw a sharp upswing in the GDP figure, with India clocking an impressive 8.2 per cent growth, making it the world’s fastest growing major economy. RBI governor Sanjay Malhotra termed it India’s Goldilocks moment, a rare phenomenon when growth is high and inflation low.

PUSHING THE THROTTLE

The big win for the BJP and JD(U) in Bihar in November saw Modi press even harder on the reform pedal. Soon after, the government announced it would implement the long-pending Labour Codes, which had consolidated 29 outdated labour laws into four new, uniform codes that simplified and redefined wages, industrial relations, social security and working conditions. The focus again was on job-creation while simultaneously ensuring workers’ security.

The Lok Sabha session at the end of the year saw another flurry of economic reforms. The government opened up the insurance sector to 100 per cent Foreign Direct Investment (FDI), signalling that India was ready to trust global capital with its long-term financial architecture. The government also enacted the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Bill that overhauled decades-old nuclear laws. It ended state monopoly in the nuclear power sector by allowing full private sector participation and sorted out civil liability issues that had dissuaded foreign investors from coming in.

On the welfare front, the Modi government boldly rebranded the Manmohan-era Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) as VB-G-RAM G (Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission Gramin). Showcasing it as NDA’s all-new employment scheme, it increased the guarantee of work from 100 to 125 days, but raised the contribution of states from the earlier 10 per cent to 40 per cent. The Opposition saw in the acronym an explicit attempt by the Modi government to recast welfare as part of its larger Hindutva politics and criticised it for increasing the burden on states. In its defence, the government pointed out that the scheme was two decades old and needed a revamp to ensure greater accountability, plug leakages and create meaningful assets.

By the end of year, it was clear that Modi would not allow political compulsions to come in the way of economic ambitions. As Dr Pramod Mishra, principal secretary to the prime minister, elaborates, “These are landmark reforms that need political will and carry risks, but the prime minister is prepared to do them because they are necessary for growth. It is full speed ahead for the Reform Express that the PM mentions.” What about the fresh focus on boosting demand through various measures? Mishra is clear: “It’s not about either supply or demand. We continue to back the supply side with measures such as infrastructure spending and performance-linked incentives while also taking measures to boost demand and these have already shown results. We are confident that with the focus on both the demand and supply side, the economy will continue to grow at an even faster pace.”

CLEANING REGULATORY CHOLESTEROL

Nripendra Misra, former principal secretary to the PM, believes Modi is aware that his third term is all about crafting a legacy and that “history will judge a prime minister on not just what he builds but also by what he dismantles”. In 2025, removing the regulatory cholesterol that had either choked or considerably slowed down economic growth became a major aspect of the prime minister’s reform agenda, for which he set up a raft of high-powered committees. They were told that the prime minister didn’t want voluminous reports but a focus on process change and rapid implementation. Modi’s goal, insiders reveal, was simple: get the government out of people’s hair.

Among these committees was one on non-financial regulatory reforms, set up in August. Headed by former cabinet secretary Rajiv Gauba and having industry representatives included as members, much of its focus was to ensure ease-of-doing-business for Micro, Small and Medium Enterprises (MSMEs), which complained about having to observe 1,400 compliances annually and monitor around 40 regulatory ones daily. Since then, the committee has worked round-the-clock on the nitty-gritty of regulation, especially the ground-level friction for obtaining licences, renewals, inspections and municipal hassles that are the real pain points in the operational interface with the state.

That meant enabling businesses to move away from licensing to registration and from inspector-driven checks to what they called risk-based, IT-enabled enforcement. As Gauba explains, “We tend to confuse regulation with enforcement. What we need is not more regulation but more enforcement, where any government oversight should be randomised and risk-based.” Much like the way software-determined random checks have become the norm in the new income tax regime.

The other issue before the committee was the frequent certification small businesses were required to get. These became an invitation for a new kind of Inspector Raj, where renewals were discretionary and thus prone to corruption. To circumvent this, the committee has come up with the idea to make licences of much longer validity, including a ‘once-given-is-given’ approach, and focusing on registration rather than licensing for smaller businesses like food vendors. Inspections, such as for safety, could be given to accredited third-party private institutions.

REDUCING EVERYDAY FRICTION

The interim 38-point agenda that the committee came up with and is already implementing works on a trust-based regulatory framework. As Gauba explains, “The PM’s governance philosophy is one of shifting from suspicion-based rules, a colonial hangover, to trust-based regulation, where you regard the citizen as honest. Our goal is to reduce the government-in-your-face approach to one where the state should be present where needed as a safety net and absent where not needed, especially in the conduct of daily business operations.” These included simplifying filing GST returns and increasing exemption thresholds, raising the turnover ceiling for a “small company” from Rs 40 crore to Rs 100 crore and reducing mandatory board meetings and audit burdens for smaller firms. For agencies like the Food Safety and Standards Authority of India (FSSAI) and the Bureau of Indian Standards (BIS), it has recommended moving complex licence-and-inspection regimes to simpler two-tier standards systems.

The impact of these reforms is being felt most in the dismantling of the wide range of Quality Control Orders (QCOs) that have slowed both import and export growth. Over the past eight years, the government had introduced mandatory product standards seemingly to ensure quality and regulate imports across 1,300 goods. These, according to experts, included standards for every nut, bolt and coil rather than the finished product, such as a fan or heater, becoming a whole new source of harassment and corruption. Producers and consumers across sectors were hit; MSMEs more so. In November, the government reduced these QCOs to around 750.

Meanwhile, the Modi government pushed the second phase of the Jan Vishwas programme overseen by the Department of Promotion of Industrial Investment and Trade (DPIIT). That saw the amendment of 17 more laws, including decriminalising a range of offences across sectors in municipal governance, motor vehicle regulation and export-related activities. These are in addition to the 183 provisions across 42 laws the DPIIT decriminalised in the first phase beginning 2023. “Overall,” says Pramod Mishra, “these reforms are designed to improve productivity, encourage entrepreneurship and strengthen India’s competitiveness by lowering the everyday friction of economic participation.” However, with Trump upending the world order, specifically Indo-US ties, Modi would face the biggest foreign policy challenge of his premiership.

THE TRUMP FACTOR

Ironically, till May 2025, the Indo-US relationship had been at its strongest in years. Modi had enjoyed good relations with Trump in his first presidency, the only sore point being the nearly $41 billion trade imbalance in Delhi’s favour. The signals from Washington DC remained positive early in Trump 2.0, with external affairs minister S. Jaishankar given a front-row seat at the oath-taking ceremony on January 20. The next day, Jaishankar, along with the foreign ministers of the other Quad countries such as Australia and Japan, met with the new US secretary of state Marco Rubio, indicating that India and the grouping were a priority for the new administration.

Modi was among the first leaders Trump hosted at the White House during an Official Working Visit on February 13, which saw the two leaders signing a clutch of forward-leaning initiatives. India had smartly paved the way for the positive outcome two weeks earlier, when in its Budget it announced a substantial lowering of tariffs for US products like bourbon, iconic motorcycle brands, ICT products and medical devices, besides allowing market access for agricultural products like duck meat and alfalfa hay. It also included a commitment to open up India’s nuclear power sector to private players, including foreign investors, and modify the contentious civil liability provisions that had prevented American companies from investing in India after the US-India nuclear deal of 2008.

Importantly, the Modi-Trump meeting saw the signing of the US-India COMPACT (Catalyzing Opportunities for Military Partnership, Accelerated Commerce & Technology), with a results-driven agenda. It included negotiating a new Bilateral Trade Agreement (BTA) by the fall of 2025 with a “bold new goal” for Mission 500 that aimed to double total bilateral trade to $500 billion by 2030. They agreed on a framework for a defence partnership for the US to sell the state-of-the-art ‘Javelin’ Anti-Tank Guided Missiles and ‘Stryker’ Infantry Combat Vehicles to India in a new co-production arrangement. Trump even offered the US Air Force’s top-of-the-line F-35 fighter jets at the joint press conference. The two countries had all bases covered when they inked a strategic technology agreement to collaborate on critical and emerging technologies in areas like AI, semiconductors and quantum computing and be part of the global supply chain for rare earth minerals needed for hi-tech.

THE MAGA INFLUENCE

However, despite the promising start, Indo-US ties began going downhill soon after the summit. This was due to several reasons, some having to do with India’s assumptions based on its dealings with Trump 1.0, and others concerning Trump himself. Professor Sumit Ganguly, senior fellow at the Hoover Foundation at Stanford University, says, “When it comes to dealing with Trump, you can throw out all the grand international relations theories we teach in universities and explain US policy through only one variable: Trump’s personality. Everything is transactional: You scratch my back and I scratch yours.”

Experts like India’s former national security advisor Shivshankar Menon are dismissive of the view in some circles that India is dealing with two Washingtons: one driven by a fickle Trump who blows hot and cold frequently, and the other by the Establishment that stands steadfastly with India. His perception: “There is no meaningful divide between, say, the Pentagon and the White House. The world has accepted that it is now living in Trump’s world, whether it likes it or not. We are dealing with a fundamentally different United States, where protectionism and isolationism are no longer deviations, but the norm.” Interestingly, Menon believes the shift reflects the longer-term movement away from liberal globalism that began before Trump.

Many experts agree with Menon, but argue that Trump has merely weaponised the political and cultural anxieties of his MAGA base, which largely comprises White Christian nationalists who perceive a loss of dominance and identity. Columnist and author Tom Friedman believes that America may be headed toward a third civil war—one distinct from the first, which pitted North against South, and the second, which centred on racial rights. This time, he argues, conflict would be driven by disputes over identity, belonging, nationalism and fundamental cultural values.

Trump is also unconstrained in unprecedented ways compared to his first term. He is not hemmed in by the establishment or by legislators, has presidential immunity from prosecution and urgently wants to get things done before the next round of Congressional elections. An American expert cautions against over-reading Trump’s perceived personal friendship with Modi, saying, “Though the two leaders enjoy warm ties, the Indo-US relationship is governed by hard campaign commitments, especially on issues such as immigration, trade and inflation.” The first shock came on April 2, when Trump announced tariffs against several countries, including India, even as Indian trade negotiators began engaging with their US counterparts. To New Delhi’s disappointment, he pegged tariffs at a high 25 per cent for Indian exporters, effective August 1.

US TIES GO DOWNHILL

Trade, though, would not be the only friction point. Immigration, both illegal and legal, were at the heart of Trump’s election campaign, and India began to bear the brunt. Trump initiated the process of deporting illegal immigrants, and the estimated 400,000 Indians living illegally in the US did not escape the clutches of America’s Immigration and Customs Enforcement (ICE) agency. When photographs of the first batch of illegal Indians being deported on chartered aircraft appeared, their legs chained and wearing handcuffs, it created an uproar in Indian political circles. That led to ICE officials assuring their Indian counterparts that women and children will not be leg-chained, but the deportation has proceeded quietly and steadily. An estimated 3,000 people have been sent back since Trump’s return, the highest in recent years. But more was in store, as Trump tightened the rules for H1B visas, impacting nearly 750,000 Indians working in the US and triggering another trail of returnees.

Yet the main rupture between Trump and Modi would occur because of unexpected circumstances. After the terror attack in Pahalgam on April 22, PM Modi ordered Indian armed forces to launch aerial strikes on nine sites, mostly in the heart of Pakistan, on May 7. Operation Sindoor, as the mission was called, triggered the sixth Indo-Pak war that would last four days before the two sides agreed to a ceasefire on May 10. While India maintained that it was Pakistan that begged for a ceasefire, embarrassingly for Modi, a Trump post on Truth Social claimed he had brokered the peace.

It is a claim Trump has made an estimated 60 times since then, undermining India’s carefully-constructed narrative and exposing New Delhi’s limits in shaping global perception. Worse, Trump invited Pakistan’s self-appointed Field Marshal Asim Munir to a meeting at the White House on June 18, signifying a deepening of their ties, much to India’s discomfort. Around the same time, Trump, in a telephonic conversation with Modi, invited him to the White House on his way back from the G7 visit to Canada. The Indian PM declined, saying he was otherwise committed, but not before making the point that India has not accepted third-party mediation in its dispute with Pakistan in the past and would not do so in the future either. This, reportedly, piqued Trump. According to experts, Operation Sindoor became an inflection point not because of differences in policy between the two countries but because India refused to validate Trump’s personal narrative and dashed his hopes of winning a Nobel Peace Prize for the many wars he claimed to have stopped. In hindsight, policy experts argue, India could have worked out a via media for acknowledging US role in brokering the ceasefire, which could have satisfied its domestic audience and pleased Trump.

Indo-US ties fell to another low in August when Trump imposed an additional 25 per cent tariff on India for importing oil from Russia, accusing it of funding Moscow’s war on Ukraine as well as profiteering from sale to other countries. The resulting 50 per cent tariff saw India joining Brazil among the nations paying the highest tariffs. According to Arun Singh, former Indian ambassador to the US, “The real damage in relations is psychological—the perception is that the US is coercive and unreliable. That shouldn’t prevent India from deepening its partnership, but it should hedge. We can do more defence cooperation with the US, but never become security-dependent. The first step must be the US lifting the Russia-related tariffs. Only after that can we realistically talk about rebuilding the momentum.” The process of repair is expected to begin once the new US ambassador, Sergio Gor—a Trump confidant—takes charge in mid-January.

LESSONS FROM 2025

Experts view Modi’s decision not to react to every Trump taunt and to draw red lines not just on third-party mediation but also to protect farmers’ interests in trade negotiations, as sagacious and mature. The Indian PM’s engagements with Russian president Vladimir Putin and Chinese president Xi Jinping at the SCO meet in China in September are seen as a clear message to Trump that India has other players in the game. The Modi government’s move to expand and diversify trade relations by signing deals with the UK, New Zealand and Oman, besides negotiating one with the European Union, should mitigate the impact of the draconian American tariffs on Indian exports.

The lessons from 2025 are clear and will be the priority for Modi and his government in 2026. It was evident at Modi’s meeting with the chief secretaries at the end of the year, in which shoring up human resources and skill development emerged as a key area of focus. The prime minister, his aides say, is aware that in an ageing western world, India has to cash in on its demographic dividend. As an expert remarked, India should not become old before it becomes rich.

Trump’s return has also forced Modi to reconfigure India’s foreign policy calculus, as the US no longer seems to conceive of India as a strategic counterweight to China. The swagger of the past has given way to sobering realism that the US regards India as economically smaller, technologically lagging and strategically ambiguous. India’s aspiration for multipolarity must contend with this hard geopolitical reality. Trump didn’t change India. What he did was expose Delhi’s assumptions about itself. Like an oyster needs a foreign organism as an irritant to secrete layers of nacre in self-defence that eventually form a beautiful pearl, Trump’s interventionist approach may push India to explore better possibilities.

It is for Modi and India in 2026 to bring about the necessary recalibration in the country’s foreign policy and decide what kind of superpower we want to be. Whether we want to compete with China, or with Pakistan. Whether our states measure themselves against each other for ease of doing business, or with high-flying trade countries like Vietnam and South Korea. Whether we allow our cities, including the national capital, to become hellholes of pollution and corruption, or engineer a civic revolution that facilitates both ease of living and ease of doing business in a harmonious, growth-oriented manner.

Modi is one of the rare leaders who are endowed with a long-horizon vision, which he has demonstrated in the past two decades as prime minister, and who has the wherewithal to steer India through these turbulent times. It is the raft of economic reforms he initiated in 2025 and the resilience he displayed amid an adverse environment, along with Trump’s role in the global churn that impacted India over the year, which has made india today hail them as Newsmakers of the Year 2025.