Abhijit Banerjee advises caution after US imposes tariffs on India
What's the story
Nobel laureate Abhijit Banerjee has advised India to rethink its strategy of importing cheap Russian oil. This comes after the United States imposed an additional 25% tariff on Indian goods, taking the total duties to 50%. The move is likely to affect India's $27 billion non-exempt exports to the US. "We need to think hard about whether Russian oil imports are worth it," Banerjee said.
Import dynamics
India halts Russian oil imports for August and September
India is the largest importer of Russian crude, bringing in 1.6 million barrels per day in July. However, it has not placed orders for August and September due to reduced discounts on Black Sea oil. The price advantage has shrunk to about $2 per barrel, making imports less attractive for Indian refiners. Oil companies usually secure contracts two months ahead of time, which explains the absence of orders despite Trump's tariff announcement on August 7.
Trade discussions
Combine trade negotiations with China, Banerjee suggests
Banerjee also spoke about India's trade negotiations with China. He said, "Maybe we should combine that with trade negotiations with China." This follows India's tough stance on Chinese investments that came about after the 2020 Galwan clash. Under Press Note 3 of 2020, countries sharing land borders with India need prior approval for foreign investments in any sector.
Economic outlook
India's economic performance this year
Banerjee expressed concerns over India's economic performance this year amid geopolitical tensions and trade uncertainties. He said, "Not as good as we expected," adding that the middle class is struggling and private investments haven't picked up. He also noted companies like TCS aren't hiring and IT salaries aren't increasing, indicating unresolved issues in the economy.