Subbarao, who steered India by the 2008 world monetary disaster, mentioned the tariff proposal from the US, particularly on labour-intensive industries like textiles, footwear, and gems, threatens exports price almost 2% of India's GDP (almost $79 billion or Rs 7 lakh crore). “Margins might be eroded, orders diverted, jobs misplaced, and crops downsized,” he mentioned, estimating a 20–50 foundation factors hit to progress relying on how effectively India manages or diverts the shock.
Danger from Chinese language overcapacity
He cautioned that Beijing's industrial overcapacity poses an extra danger. With China dealing with its personal tariff obstacles from the U.S., Chinese language exporters might flip to India to dump surplus items. “We should additionally reckon with China's risk of dumping in our markets to compensate for their very own lack of U.S. market share,” he warned.
Stress on competitiveness and jobs
In response to Subbarao, the dual stress from U.S. tariffs and Chinese language dumping may weaken India's push to affix world worth chains below the China+1 technique. He added that the distributional results can be regressive, deepening revenue inequality and straining the formal job market.
Reputational issues from US remarks
Subbarao additionally flagged the potential reputational injury after Trump referred to India as turning into “useless like Russia.” “Even so, for India, being labelled a ‘useless' financial system by a U.S. president carries reputational prices,” he mentioned. “Such feedback can elevate India's danger premium, dent investor sentiment, and immediate portfolio reallocation even with out direct coverage actions.”
He harassed that with world liquidity tightening and borrowing prices rising, India should defend susceptible sectors and speed up structural reforms to take care of investor confidence and macroeconomic stability.
Affect on fiscal and financial insurance policies
On whether or not commerce tariffs may affect fiscal and financial coverage, Subbarao mentioned India's fiscal consolidation path might be disrupted if tariff-hit sectors want short-term help. After final week's coverage evaluation, the governor mentioned the RBI is monitoring the impact of tariffs on progress, inflation, and the rupee. If tariffs gas inflation and weaken the foreign money, rates of interest might keep excessive; if progress slows sharply, charges could also be eased. Coverage, he added, will stay data-dependent and cautious.
