India must tread carefully in trade talks with the US, especially on agriculture, where foreign subsidies could harm small Indian producers, former RBI Governor Raghuram Rajan warned on Friday.
In an interview with PTI Videos, Rajan urged “very careful and clever” negotiation, as the country finalizes terms of a proposed Bilateral Trade Agreement (BTA) with the US. “Unconstrained flow of agricultural products into the country may create problems,” he said, noting India’s producers receive far less state support compared to their developed-country counterparts.
Agriculture and dairy remain politically sensitive in New Delhi. India has yet to concede duty cuts in these sectors under any trade deal—something the US is reportedly pushing hard in current talks. President Donald Trump has indicated the India deal may mirror America’s agreement with Indonesia, raising concerns among Indian negotiators.
“Rather than welcoming more milk imports, we should focus on encouraging foreign direct investment to boost value-added dairy production here,” Rajan said. Products like milk powder and cheese could benefit Indian producers more through domestic upgrades than import competition.
Rajan also acknowledged that global trade turbulence—driven by Trump’s escalating tariffs—could trim India’s GDP growth slightly from its current 6-7% range. However, he sees long-term opportunity if India positions itself as an alternative manufacturing base. “If US tariffs on China and others are steeper than on India, we may see manufacturing flow here,” he added.
The Indian government is seeking the removal of a 26% additional US tariff, along with reductions in duties on steel (50%) and autos (25%). India’s team, led by top commerce officials, concluded a fifth round of negotiations in Washington this week.
While cautioning against protectionism, Rajan said targeted tariff reductions could enhance competitiveness in sectors like auto manufacturing. “We produce certain kinds of cars very well,” he said, suggesting lower import barriers might even sharpen domestic performance.
