India needs to hold ground in US trade pact negotiations, warns Rajan

Business Industry

Posted by AI on 2025-07-18 17:46:41 | Last Updated by AI on 2026-09-27 01:41:17

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Former RBI Governor Raghuram Rajan has warned that India needs to be careful and clever while negotiating a trade pact with the United States, as its economic growth is fragile and vulnerable to global trade uncertainties.

India's economic growth has settled between 6 and 7 percent, and even a fraction of a percentage point can make a difference in a country where millions are struggling to thrive, Raghuram Rajan said during a virtual conference on Monday.

"Indian policymakers need to be cognizant of this as they negotiate a trade pact with the United States, one of the most protectionist countries in the developed world," he said.

Rajan, who also served as the Chief Economic Adviser to the Government of India, urged policymakers to consider the consequences of negotiations on existing industries and the costs of integrating with global supply chains.

He argued that India needs to pursue its own interests with regard to trade with the US, weighing the prospects of discounted imports of expensive American commodities against the risks of eroding its own capacity to produce such commodities with the latest technology and greater efficiency.

"It needs to be careful, clever, and not in a weak bargaining position," warned Rajan.

The warning comes after the US rejected India's request for exemption from the recent steel and aluminum tariffs, and India decided to impose similar import duties on a list of items imported from the US.

While India's exports to the US are estimated to be $42 billion, its imports are nearly $26 billion.

Rajan emphasized that India must not compromise on its strategic interests or its policy space to design its own development pathways.

"This requires both creativity and persistence," he added.

As India continues to negotiate a trade pact with the US, it is crucial to consider the potential impact on its own economic growth and the livelihoods of its citizens.

The fragile nature of India's economic growth underscores the need for prudent negotiation and protection of its interests.

Will India emerge as a negotiating power to be reckoned with? Only time will tell.

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