Former IMF Deputy Managing Director Gita Gopinath spoke openly about the implications of Trump tariffs on the Indian economy. At the World Economic Forum in Davos 2026, she warned that US tariffs could reduce India's growth rate by up to 0.7%. To mitigate the tariff impacts, she emphasized the importance of diversifying export destinations for countries, including India.
IMF Forecasts Discussed by Gopinath
While speaking with Rajdeep Sardesai at the World Economic Forum in Davos, Gita Gopinath highlighted global uncertainties. She noted that while global growth forecasts remain a useful guide, they should be interpreted cautiously in today's rapidly changing trade environment. Regarding the IMF's growth forecasts for the Global Economy, Gopinath stated, 'It's a good and useful indicator. I must say that the world followed closely the estimated growth of 3.2%, reaching 3.3%, a slight improvement but close to expectations.'
Alert on Indian Economy
Discussing Trump Tariffs, she mentioned that the situation involves considerable risk, hoping the global economy remains stable. When asked if India's status as one of the fastest-growing economies, with robust domestic demand, could shield it from global challenges, Gopinath responded cautiously. She indicated that, as projected, US tariffs could reduce India's growth rate by around 0.7% over the next two years.
How Effective is Export Diversification?
According to Gita Gopinath, shifts in trade amidst tariff tensions have been observed. 'Exports from India, which previously went to the US, are now being routed to the Middle East and other markets. Similarly, China has redirected some trade flows from the US to other Asian and European countries, although some flows have returned to the US.' Gopinath warned, though, that such shifts in global trade do not completely negate the effects of tariffs and that the situation remains unsustainable. 'I don't think businesses can easily pivot away from the US and sell in other markets without considering the consequences,' she added.
How Will the Tariff Issue be Resolved?
Gopinath reiterated the significance of the US market in global trade dynamics. With high tariffs, the effects surely resonate. The economist of Indian origin noted that resolving this issue requires high-level political engagement. The solution hinges on discussions between President Donald Trump and Prime Minister Narendra Modi.
The conversation at Davos and the insights shared serve as a crucial reflection on current international trade dynamics and the repercussions of protectionist policies.
