Mumbai: Former Reserve Bank of India Governor Dr Raghuram Rajan has sounded a clarion call for India to rethink its trade strategies, labelling the United States’ steep 50% tariffs on Indian exports as a “wake-up call”.
In an exclusive interview with India Today on Wednesday, the renowned economist warned that global trade, investment, and finance are increasingly being weaponised, urging India to tread cautiously and diversify its economic dependencies. The tariffs, which include a 25% penalty linked to India’s purchase of Russian oil, have sparked a heated debate about New Delhi’s geopolitical and economic choices.
A Tariff Shock With Geopolitical Roots
The US tariffs, effective from August 27, are among the highest imposed on any American trading partner. They target India’s $80 billion export market, particularly for labour-intensive sectors like textiles, gems, and jewellery. Rajan highlighted the unfairness of singling out India, noting that China and Europe, the largest importers of Russian oil, face no comparable penalties. “This isn’t about fairness; it’s geopolitics,” he said, pointing to a breakdown in India-US trade relations that were expected to benefit from the Modi-Trump rapport.
The Russian Oil Dilemma
Washington has taken offence at India’s purchase of discounted Russian crude, which surged after Western sanctions on Moscow post-2022. US Trade Adviser Peter Navarro recently accused Indian refiners of “profiteering” by buying and refining Russian oil, a charge Rajan dismissed as selective. He suggested India reassess its oil imports, weighing the benefits to refiners against the tariff burden on exporters. “If the gains aren’t substantial, we should question whether to continue these purchases,” he argued, advocating a pragmatic approach to balance economic and political pressures.
A Call For Diversification And Reform
Rajan sees the tariff crisis as an opportunity for structural reforms to propel India towards 8-8.5% growth, essential for employing its youth. He urged New Delhi to look beyond the US, strengthening ties with Europe, Africa, and Asia while liberalising trade policies. With India navigating a complex global landscape — evidenced by Prime Minister Modi’s upcoming SCO summit visit to China— this wake-up call could redefine its economic and diplomatic trajectory.