Former RBI governor Raghuram Rajan, reacting to the 50 per cent tariff imposed by the US on India, said that this is a “wake-up call” for the government of India to see the truth that the relationship between India and the US has broken. In an interview with India Today, the economist said that this is the impact of relying on one major economy, and now that the lesson has been learned, authorities should talk to other important countries in East Asia, Europe, and Africa rather than focusing on one country. He further pointed out the importance of reforms to boost the GDP by 8 to 8.5 per cent and employ India’s youth.
Comparing India’s situation with its neighbours, he said that the major disadvantage is the 25 per cent base tariff, which is much higher compared to other Asia countries, which will ultimately make the Indian goods costlier. He even said that the reasons behind the tariffs are purely political and far from fair economic causes. He emphasises that sovereignty and fairness are far from the truth, and the tariffs can be seen as Trump’s use of economic force in a situation where using military force is tough.
Citing several other reasons, he said that the US President believes that the current account deficit and trade deficit made it evident how countries were taking advantage of the US despite sending goods at a cheaper price to the US to benefit the consumers in the US. Trump’s perspective, as per Rajan, has been consistent since the 1980s, when he had a similar mindset regarding Japan. Another reason that the former governor gave was the President’s flawed view that the tariffs act as taxes on outsiders rather than the US consumers.
He further highlighted that Trump aims to use the tariffs as a source of extra revenue to compensate for the tax cuts made by his government in the United States.
The former governor also talked about India’s oil imports from Russia, which is given as a reason for imposing tariffs. He said that refiners were making profits from the oil sale, and the exporters are paying it by increased tariffs. Citing the difference, he said that when the benefit is not large enough, the oil purchase must also be revisited.
