Raghuram Rajan warns against harsh tariff commitments in US trade deal
India should target tariff rates between 10 and 20 percent during current trade negotiations with the United States, former Reserve Bank of India head Raghuram Rajan said. The economist cautioned against accepting difficult obligations similar to those made by Japan and European nations, which he described as potentially damaging to their economies over time. Speaking with American policy organization DeKoder, Rajan argued that zero tariffs would be ideal but stressed India must remain competitive with regional rivals.
Several East and South Asian nations have accepted tariff levels near 19 percent, while developed economies like Europe and Japan operate at 15 percent, Rajan noted. He criticized investment pledges some countries made to Washington, saying they promised profit shares they likely cannot deliver without economic harm. The strategy of accepting tough terms with plans to renegotiate later poses risks, he warned.
Indian textile exporters face serious threats from rising import barriers in America, potentially losing orders to competitors. Rajan emphasized that swift action is necessary to preserve market access for labor-intensive sectors. The challenge requires balancing the protection of domestic manufacturers against demands for lower barriers from American companies seeking greater access to Indian consumers.
