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Raghuram Rajan said the US cannot be trusted
Speaking at a conversation hosted by the Chicago Council on Global Affairs, economist and former RBI Governor Raghuram Rajan said the US cannot be trusted and the entire tariff saga has been rather disappointing for New Delhi.
Economist Raghuram Rajan says the US is not trustworthy for India
He warned that as the US President Donald Trump imposed a 50 per cent tariff on India but only 19 per cent on Pakistan, the action should not be forgotten in haste.
Rajan said: “I think India was getting closer to the United States over the last 20 years and it is very disappointed. I'm not talking about leadership, I'm talking about people who get hit with this tariff. I don’t mean to rub salt in the wound – at the same time Pakistan has a tariff rate of 19 per cent, India has 50 per cent. Where is the friendship between Modi and Trump that was extolled? It's a slap in the face for Modi because the Indian opposition is asking him ‘where's your friendship?’”
He went on saying that India cannot be the most tariffed country in the world, even more than China, and then have Washington talk about “military friendship and alignments and joint manoeuvres and so on”.
Rajan said these kinds of “actions stay long in people’s minds”.
“The US cannot be trusted. I mean earlier it took a long time. In the 1970s (former US President Richard) Nixon and (former Secretary of State Henry) Kissinger tilted the US towards Pakistan in the Indo-Pak War in 1971. They sent the seventh fleet to stop the war, to help Pakistan. Indians were very miffed at that and the Soviet Union helped India. That put India in the Soviet camp for 25 years,” said Rajan, adding that it took a lot of time to get India out of that camp.
“India doesn't have a lot of other places to go, shares a border with China, has fought one serious border war and a bunch of skirmishes with China. India is suspicious of China. It's also very worried about Chinese goods coming and swamping India. It's happy for Chinese investment but it wants to be a little careful about becoming dependent on China,” he added.
Rajan said that while India has a good relationship with Japan, Australia and other QUAD nations, it wants to build a relationship with Washington and was left very disappointed that this has not become transactional.
The former RBI Governor explained that the 50 per cent tariff has hit industries in different ways. Companies like Apple that can persuade the administration and get waivers, which means they might not be hugely impacted. But smaller companies are not finding it sustainable to sell their products in the US for a 50 per cent tariff.
“Those relationships once disrupted are hard to build back because somebody else has taken up the slack in Bangladesh or Vietnam and so it's something that will have costs. It's typically small and medium enterprises that will bear that cost and the longer this lasts the more it becomes a permanent rupture,”Rajan said.