Former RBI Governor Raghuram Rajan has warned that the global tide may be turning against the United States, with mounting doubts about its leadership and policy direction, and a rising opportunity for India to step up.

In an interview to CNBC-TV18, Rajan pointed to a sharp shift in global sentiment since the start of the year. 

“Everything else is moving up, the U.S. is moving down,” he said, citing growing international skepticism about American governance. 

“The administration is trying to do one thing, the courts are trying to do something else… there is a lot of ferment going on in the U.S.”

Just months ago, Rajan noted, elite forums like Davos were still buoyed by faith in U.S. exceptionalism. But five months later, that optimism has faltered. While he acknowledged that the country’s innovation and energy remain strong, he said they now exist at a “somewhat weaker level.”

In contrast, Rajan believes India could be on the cusp of a transformative moment. With global supply chains being reshaped, he said, “It could be India’s moment” if the country plays its cards right.

Rajan, a professor at the University of Chicago Booth School of Business, called on Indian policymakers to go beyond subsidies and create a genuinely attractive environment for foreign investors. 

“Roll out the red carpet,” he urged, pointing to the need for a predictable tax regime, production assurances, and consistent policy signals.

While some Indian states are making moves, Rajan said much more must be done. “Foreign direct investment hasn’t received enough attention,” he warned, arguing that India must act decisively to position itself as a reliable manufacturing hub in a fragmented global economy.