‘Act, Don’t React’: Raghuram Rajan’s Guidance for India Amid Changing Global Dynamics
Raghuram Rajan: India Must Adopt a Proactive Stance Amid Global Economic Shifts
In light of the uncertainties triggered by the US’s reciprocal tariffs, former Reserve Bank of India (RBI) Governor Raghuram Rajan emphasized the necessity for India to adopt a more proactive stance instead of merely reacting to circumstances. Speaking during an interaction with CNBC TV18 at a UBS Conference, Rajan noted that the tariff policy previously heralded by US President Donald Trump as a means to rejuvenate American manufacturing has not met its anticipated outcomes.
Rajan pointed out that global investors are reevaluating risks and opportunities, leading to the potential for a “significant reset in global portfolio holdings,” as some portfolio managers begin to lessen their exposure to the US market.
As the global landscape evolves, Rajan believes that India has the opportunity to emerge as a key beneficiary, provided it can assure policy consistency and cultivate a business-friendly environment. He remarked, “A red carpet and policy stability can drive substantial foreign direct investment (FDI) into India,” urging the nation to surpass reactive responses to fully leverage this pivotal moment.
According to provisional government data, India attracted $81.04 billion in gross FDI during the fiscal year 2024-25, marking a 14 percent increase from the previous year. Equity inflows alone exceeded $50 billion, up 13 percent year-on-year. Nevertheless, the growth momentum decelerated in the final quarter of the fiscal year, with gross FDI plummeting by 24.5 percent to $9.34 billion.
Earlier this April, Donald Trump had implemented a 90-day pause on most country-specific tariffs, while the 10 percent blanket duty on nearly all US imports remained intact. Concurrently, negotiations between India and the US regarding a trade deal are ongoing, with a delegation of US officials set to visit New Delhi in the coming weeks for further discussions, as reported by PTI. This visit is particularly crucial as both nations aim to finalize the agreement ahead of the July 9 deadline, with India advocating for a complete exemption from the 26 percent reciprocal tariff imposed by the US on Indian goods.
