Former Reserve Bank of India Governor and noted economist Dr Raghuram Rajan has described the steep tariffs imposed by the United States on Indian exports as “deeply distressing” and a clear “wake-up call” for India to reduce its reliance on any single trade partner.
The remarks came after Washington decided to levy 50 per cent tariffs on Indian products, alongside an additional 25 per cent penalty linked to India’s purchase of Russian oil.
The new duties took effect on Wednesday under the Trump administration, marking a major setback for Indian exporters.
In an interview, Dr Rajan said the episode underlined how trade, investment and finance had increasingly become weaponised in today’s global order. “This is a wake-up call.
Let us not become dependent on any single country to a large extent. Let us look east, to Europe, to Africa, and continue with the US, but unleash reforms that will help us achieve the 8–8.5% growth needed to employ our youth,” he said.
While India has been subjected to a punitive levy over its crude imports from Russia, other large buyers of Moscow’s energy, such as China and European nations, have escaped similar treatment. Dr Rajan suggested that New Delhi reassess its oil policy.
“We need to ask who benefits and who is hurt. Refiners are making excess profits, but exporters are paying the price through tariffs. If the benefit is not large, perhaps it is worth considering whether we should continue these purchases,” he argued.
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The former IMF Chief Economist stressed that the issue was not fairness but geopolitics. “We should not be dependent on anybody to a large extent. Trade has been weaponised. Investment has been weaponised. Finance has been weaponised. We must diversify our sources of supply and markets of export,” he said.
He further urged India to see the crisis as an opportunity. “By all means, work with China, Japan, the US, or anyone else. But don’t be dependent on them. Ensure you have alternatives, including self-reliance where possible,” Rajan added.
He emphasised the need for structural reforms to improve the ease of doing business, integrate into global supply chains, and make domestic firms more competitive.
Calling the tariffs a “blow” to US-India ties, Rajan warned that the move would particularly hit small exporters such as shrimp farmers and textile manufacturers, putting jobs at risk. “It is also harmful to the US consumer, who will now buy goods at a 50 per cent markup,” he noted.
Explaining Trump’s tariff policies, Rajan pointed to three drivers: the long-held belief that trade deficits reflect exploitation; the notion that tariffs raise easy revenues from foreign producers; and, more recently, the use of tariffs as tools of foreign policy. “It is essentially an exercise of power. Fairness is not the issue here,” he said.
On India’s expectations, Rajan observed that New Delhi had anticipated tariffs in line with other Asian nations, around 20 per cent, and hoped the Modi-Trump relationship would ensure a better outcome.
“Something changed midway in the negotiations,” he said, linking the shift to US allegations that India was enabling Russian oil sales. “Clearly, the relationship has broken down.”
Responding to White House Trade Adviser Peter Navarro’s charge that India was “profiteering” by refining Russian oil, Rajan said such statements could not have been made without approval from the top.
“What clearly seems to have happened is, at some point, the president (Trump) has decided that India is a country which is not playing by the rules that he says and needs to be singled out. Navarro would not write in the Financial Times without permission,” he remarked.
Navarro, a longtime Trump aide, said last week that Indian refiners were cashing in while fuelling the Ukraine war. “They don’t need oil — it’s a refining profiteering scheme,” he alleged.
Since Trump’s announcement of “reciprocal” tariffs in February and the subsequent 50 per cent duties, ties between Washington and New Delhi have visibly soured.
While Trump has justified the move as a matter of fairness, the Modi government has stood firm, vowing not to bow to pressure and continuing crude purchases from Russia in line with India’s interests.
New Delhi has also accused Washington of discriminatory treatment, pointing to Chinese and European imports of Russian energy that continue without similar penalties.
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