Former Reserve Bank of India Governor Raghuram Rajan has expressed concerns over the potential economic and political consequences of high tariffs and external pressure on India’s energy policies. Speaking on the matter, Rajan said that a proposed 50 percent tariff on certain goods is unsustainable for both the United States and India, as it could lead to trade distortions, reduced competitiveness, and a possible escalation of retaliatory measures.
Rajan’s comments come in the backdrop of growing speculation about the trade stance of former US President Donald Trump, who is widely expected to adopt a more aggressive policy on tariffs and imports if re-elected. Reports suggest that Trump may pressure India to reduce its imports of Russian oil, citing geopolitical concerns over the Ukraine conflict. However, Rajan cautioned that such a move could compromise India’s energy security and strain its domestic economic priorities.
According to Rajan, India has worked over the years to diversify its energy supply sources while keeping costs manageable for domestic consumers and industries. Russian crude oil, offered at discounted rates due to global sanctions, has been a significant factor in stabilizing fuel prices in India. Any abrupt reduction in imports, he warned, could lead to higher costs, inflationary pressures, and a political backlash from stakeholders dependent on affordable energy.
He further highlighted that while India values its trade and strategic partnership with the United States, it should not compromise its economic autonomy. Rajan stressed that policy decisions should be guided by India’s long-term development goals, particularly in ensuring stable and affordable energy supplies. He added that global energy markets remain volatile, and India must retain the flexibility to make decisions that safeguard its economic stability.
The former RBI chief also underscored that imposing extremely high tariffs is not a sustainable economic strategy for any country. He pointed out that such measures often lead to counter-tariffs, which can hurt exporters, reduce consumer choice, and increase costs across multiple sectors. In the case of the US and India, higher tariffs could undermine the positive momentum built in recent years in areas such as technology cooperation, services trade, and investment flows.
Economists note that India’s trade policy is already navigating complex challenges, including balancing domestic manufacturing incentives with global competitiveness and meeting environmental commitments while sustaining growth. Rajan’s warning serves as a reminder that hasty trade and energy policy shifts can have far-reaching consequences beyond immediate political considerations.
In conclusion, Rajan urged policymakers to focus on pragmatic, balanced approaches to both trade and energy issues. By prioritizing economic resilience and diplomatic balance, he said, India can navigate external pressures while safeguarding its long-term growth trajectory. His remarks come at a time when both trade relations and global energy markets are entering a period of heightened uncertainty.
