Trump tariffs could shave 50 bps off India’s growth, worsen jobless recovery, says former RBI governor

India could lose up to half a percentage point in annual growth if the United States under President Donald Trump imposes steep tariffs on labor-intensive exports such as textiles, gems and jewellery, former Reserve Bank of India (RBI) governor Duvvuri Subbarao has warned.

Subbarao cautioned that a 50% US tariff could hit exports worth nearly 2% of India’s GDP, deepening the country’s persistent “jobless growth” problem, according to The Indian Express.

Beyond the economic damage, Subbarao flagged reputational risks from Trump’s recent remark likening India’s economy to a “dead” one, saying such rhetoric from the world’s largest economy can dent investor confidence, raise India’s risk premium, and make global capital more expensive.

“Labour-intensive sectors where we compete on price and scale — textiles, footwear, gems, jewellery — will see margins eroded, orders diverted, and jobs lost,” Subbarao said, warning that the impact would be regressive and widen inequality.

He stressed that rising protectionism and geopolitical tensions were already tightening global liquidity, pushing up foreign borrowing costs, and clouding India’s $5-trillion economic target. In his view, exporters must urgently diversify markets, move up the value chain, and leverage free trade agreements, while the government strengthens domestic supply chains and social protection to sustain demand.

“The world may discount Trump’s impulsive remarks, but being labeled a ‘dead’ economy by a US president carries reputational costs that go beyond trade,” Subbarao said. “It signals eroding geopolitical leverage and can influence capital flows.”