US tariffs could knock 50 bps off India's growth, deepen jobless recovery

Former Reserve Bank of India Governor Duvvuri Subbarao says high tariffs proposed by US President Donald Trump on labour-intensive exports like textiles and gems will deepen the jobless growth problem.

- Duvvuri Subbarao, Former Governor, Reserve Bank of India

"A 50% US tariff threatens exports worth around 2% of GDP. Depending on the extent of diversion and adjustment, the growth hit could be 20-50 basis points in a year," he tells George Mathew in an interview. Excerpts:

With the US increasingly turning protectionist and raising tariffs on imports from China, India, and other countries, how do you assess the long-term impact of these trade policies on India's exports and manufacturing competitiveness? Expert estimates suggest that tens of billions of dollars' worth of Indian exports to the US are at risk, so the immediate impact will be sharp. Labour-intensive sectors where we compete on price and scale such as textiles, footwear, gems & jewellery will see margins eroded, orders diverted, jobs lost, and plants downsized. The distributional impact will be regressive, widening income inequality. We must also reckon with China's industrial overcapacity and the possibility of their dumping in our markets to compensate for their own loss of US market share.