Trump’s tariffs on India may be good news, says ex-RBI deputy governor: Report

US President Donald Trump’s tariffs on Indian goods may not be bad news, as they would push the Indian government to lower trade barriers, spurring competition and growth, said former Reserve Bank of India (RBI) deputy governor Viral Acharya.

Indian firms would thus be forced to raise their standards and compete with global rivals, Acharya said in an interview with Bloomberg. This, he added, would also lead to higher-quality jobs and a larger manufacturing base.

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Acharya is now the director of doctoral education at the NYU Stern School of Business. He was the RBI deputy governor between 2017 and 2019.

Trump has threatened to impose reciprocal tariffs on countries from April 2, 2025, raising taxes on imports to the US to the same level that a trading partner imposes on American goods.

India would be among the countries worst hit by these tariffs, the report cited economists as estimating. This is because of the wide 10% differential between the two countries.

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As a result, the Indian government has already made significant cuts in February, and is discussing reducing import taxes on US goods such as cars to chemicals and electronics.

Acharya said that opening the economy to foreign firms won’t just result in direct competition, but “may lead to substantial knowledge transfer as strategic partnerships are formed with foreign players.”

He added that “eventually, some global giants will emerge from that process.”

He had written in a March 2023 paper that India’s “Big 5” firms — Reliance Group, Tata Group, Aditya Birla Group, Adani Group and Bharti Telecom Ltd. — had grown at the expense of smaller local firms, with the government’s “sky-high tariffs” shielding them from foreign competition.

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Acharya suggested lowering tariffs in phases with clear communication about the end goal to minimize the impact on Indian industries by making the policy path predictable.

This can potentially lead to businesses investing in efficiency, innovation, and focus on upskilling their workers.

“And that is the transformational change India needs at the moment,” he added. “It is just a version of what worked for us in the 1990s and 2000s.”