India-US trade: Nobel Prize-winning economist Abhijit Banerjee has urged India to reassess whether importing cheap Russian oil is worth the mounting trade costs with the United States, following President Donald Trump’s decision to sharply increase duties on Indian goods.
Washington’s punitive move
Last week, President Trump announced an additional 25 per cent tariff on Indian exports to the US, citing New Delhi’s continued purchases of Russian crude. The move raises the total levy to a steep 50 per cent, among the highest imposed by Washington on any trading partner. The tariff will come into force on August 27.
Banerjee told PTI that India should “think hard” about the trade-off between cheaper oil and the potential loss of the US market. “We need to think hard about whether Russian oil imports are worth it and then go back to the US to say… will they take it (tariff) off, if we stop importing Russian oil,” he said on the sidelines of an event at BML Munjal University.
Should India buy Russian oil?
The new duties could impact roughly $27 billion worth of non-exempt Indian exports to the United States. Policy circles in New Delhi are already debating whether to scale back Russian crude imports to reduce the fallout.
“At a 25 per cent tariff, some of our exports are already not competitive, so maybe 50 per cent does not matter,” Banerjee observed, highlighting that some sectors have already lost pricing advantage.
India, currently the largest global buyer of Russian crude, imported 1.6 million barrels per day in July. However, refiners have placed no new orders for August or September as price discounts have shrunk to around $2 per barrel, which is far less than the earlier steep markdowns that made Russian supplies so attractive.
In the last financial year, India imported 88 million tonnes of Russian oil, accounting for over one-third of its total crude shipments of 245 million tonnes. The contracts for August and September had been finalised before Trump’s 7 August tariff announcement.
Delhi needs to consider trade negotiations with China
A long-discussed India–US trade deal remains stuck, with Washington demanding greater access to Indian agricultural and dairy markets. Banerjee suggested that New Delhi consider tying broader trade negotiations, including those involving China, to the ongoing talks with the US. “Maybe we should combine that with trade negotiations with China. I think it is a good moment to do it,” he said.
Since the 2020 Galwan Valley clash, India has tightened investment rules for countries sharing land borders under Press Note 3, requiring prior government approval for all sectors. Asked whether India should join the ASEAN trade bloc, Banerjee replied: “Maybe, I think we need to. I think China is much more important than ASEAN.”
On the domestic economy, Banerjee warned that growth prospects for the year are “not as good as we expected” due to geopolitical tensions and trade uncertainty. He cited stagnant private investment and a squeeze on the middle class. “Companies like TCS are not hiring, the salary of IT employees is not increasing… These are all issues we have not dealt with, and we are sitting on them,” he said.