Raghuram Rajan Calls US Tariffs On India A “Wake-Up Call” For Diversification

Raghuram Rajan

New Delhi: Former RBI Governor and noted economist Dr. Raghuram Rajan has described the steep 50% tariffs imposed by the United States on Indian exports as “deeply distressing” and a clear “wake-up call” for India to reduce dependence on any single trade partner.

Speaking to India Today TV after Washington’s fresh levy — which includes an additional 25% penalty linked to India’s Russian oil purchases — Rajan cautioned that trade, investment, and finance are increasingly being “weaponised” in the global order.

“This is a wake-up call. Let us not become dependent on any single country. We must diversify — look east, to Europe, to Africa, and continue with the US, but also unleash reforms to achieve the 8–8.5% growth needed to employ our youth,” Rajan said.

While India has been penalized for importing Russian crude, Rajan pointed out that China — the largest buyer of Russian oil — and European nations purchasing significant volumes have escaped similar U.S. action.

He urged India to reassess its energy policy:

“Refiners are making profits, but exporters are paying the price through tariffs. If the benefits are not large, perhaps we should rethink these imports.”

Calling the tariffs a “blow” to US-India ties, Rajan warned that small exporters, including shrimp farmers and textile manufacturers, will be among the worst hit. He also noted that American consumers too would end up paying more due to inflated import prices.

On Trump’s trade policies, Rajan said tariffs are less about fairness and more about power. He highlighted three drivers behind them — the U.S. perception of being exploited by trade deficits, the view that tariffs generate revenue, and their growing use as a foreign policy weapon.

Rajan also revealed that India had expected tariff treatment similar to other Asian countries — around 20% — but negotiations shifted after Washington accused New Delhi of enabling Russian oil sales.

Responding to White House Trade Adviser Peter Navarro’s recent remarks that India was “profiteering” from refining discounted Russian oil, Rajan said:

“At some point, the president has decided India is not playing by the rules. Navarro would not write in the Financial Times without permission.”

Despite the escalating tensions, Rajan argued the crisis should be seen as an opportunity for India to accelerate reforms, boost competitiveness, and integrate deeper into global supply chains — while building resilience through diversification and self-reliance.

Highlights:

Raghuram Rajan calls US tariffs on Indian exports “deeply distressing” and a “wake-up call” for diversification.
Warns that trade, investment, and finance are being “weaponised” and urges India to look beyond the US.
Says the tariff blow will hurt small exporters and American consumers while exposing strained US-India ties.

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