‘India is not so dependent on US and has alternatives’: Ex-RBI MPC downplays trade deal risks

As concerns grow over delays in the India-US trade deal, economist and former member of the RBI’s monetary policy committee Ashima Goyal has rejected the notion that India’s growth trajectory depends on Washington, arguing that emerging markets and alternative partnerships now matter much more.

Goyal said the intense focus on the US was something she had seen before, including during her tenure on the RBI’s rate-setting panel. “That’s one thing that I’ve really experienced as a member of the MPC when we interact with the markets. I’ve found this extreme focus on the United States, and maybe part of it is because there’s so much information coming from there. So much FDI is coming from there, etc.,” she said while speaking to CNBC International.

Goyal said that even in sensitive areas like capital flows and exchange rates, India has had more independence than is often realized. “For example, the exchange rate. Because we have sequential capital account convertibility, interest rate sensitive flows (cross-border capital movements that respond quickly to changes in interest rates) are not that important and we have been able to change our interest rates with considerable independence from the United States,” she said.

“Today I see the same attention paid to the US trade deal. But there are alternatives,” the economist said, highlighting changing global growth models. “Today, emerging markets account for more than 50% of global growth, and the United States will find that people will develop alternatives if they are not ready to party.”

“I think we need to notice these alternatives and not worry and see that they are viable and not worry too much about the U.S. trade deal,” she said.

Goyal pointed out that India’s exposure to the US market is limited compared to other major Asian economies. “As I have said from the beginning, India is not that dependent on the United States and its trade with them. It is a very small part of our total exports, compared perhaps to Japan and South Korea,” she said. “That advantage is that it’s not large enough to have a major impact and we are developing alternatives.”

At the same time, the former MPC member said India remains open to deeper engagement with Washington, given the broader relationship. “We want to engage with the US. We have a huge population of NRIs there. We see a lot of benefits in many types of interactions with the US, and so we will continue. We are open to it. We will continue to try to make the deal happen,” she said.

But she drew a clear line on domestic sensitivities. “We will not do this at the expense of our farmers. So they need to understand our sensitivities,” Goyal said.

She stressed that many of the FTAs ​​concluded with India respected everyone’s priorities and resulted in a win-win outcome. “So we’re looking for the same thing with the U.S. trade deal,” she said. “It’s better that this is delayed, but we get a better deal than if you quickly agree to something that risks harming large and vulnerable business groups in India,” she added.

Debate on trade agreements

Earlier this week, US Commerce Secretary Howard Lutnick suggested that the deal was done, but that it did not happen because Prime Minister Narendra Modi did not personally call President Donald Trump. “Everything was set up. I said [to the Indian side] you need to ask Modi to call the president. They weren’t comfortable, so Modi didn’t call,” Lutnick said in a podcast released Friday.

India, however, rejected this characterization. Foreign Ministry spokesperson Randhir Jaiswal said the comments were “not accurate”. “India and the United States were committed to negotiating a bilateral trade agreement as early as February 13 last year. Since then, both sides have held several rounds of negotiations to reach a balanced and mutually beneficial trade agreement. On several occasions, we have been close to an agreement,” Jaiswal said. He added that Modi and Trump spoke on the phone eight times last year, “discussing different aspects of our broad partnership.”