'India is not so dependent on US, has alternatives': Ex RBI MPC member plays down trade deal risks
As concerns grow over delays in India–US trade deal, economist and former RBI Monetary Policy Committee member Ashima Goyal has rejected the idea that India's growth trajectory hinges on Washington, arguing that emerging markets and alternative partnerships now matter far more.
Goyal said the intense focus on the US is something she has seen before - including during her time on the RBI's rate-setting panel. "This was a thing that I really experienced as an MPC member when we would interact with markets. I found this extreme focus on the US, and maybe that is partly because there's so much information coming from there. So much FDI comes 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 assumed. "So, for example, the exchange rate. Because we have a sequence capital account convertibility, the interest-sensitive flows (cross-border capital movements that respond quickly to changes in interest rates) are not that large and we were able to move our interest rates with considerable independence from the US," she said.
"Today, I see the same focus on the US trade deal. But there are alternatives," the economist said, pointing to shifting global growth patterns. "Today, emerging markets account for more than 50% of world growth, and the US will find that people will develop alternatives if they are not willing to party right."
"I think we need to notice these alternatives and not worry and see that they are viable and not worry so much about the US trade deal," she said.
Goyal stressed that India's exposure to the US market is limited relative to other major Asian economies. "As I said from the beginning, India is not so dependent on the US and trade with the US. It's a very small part of our total exports, compared to maybe Japan, South Korea," she said. "That advantage is that it's not large enough to make 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 NRI population there. We see a lot of benefit in many kinds of interactions with the US, and so we will continue. We are open to it. We will continue to try to get the deal through," she said.
But she drew a clear line on domestic sensitivities. "We will not do it at the cost of our farmers. So they have to understand our sensitivities," Goyal said.
She pointed out that many of the FTAs that have been concluded with India have respected each other's priorities and developed a win-win outcome. "So we look for the same thing with the US trade deal," she said. "It is better if it is delayed but we get a better deal than that you sort of quickly agree to something that is likely to hurt large commercial and vulnerable groups in India," she added.
Trade deal debate
Earlier this week, US Commerce Secretary Howard Lutnick suggested the deal had been close but failed to materialise because Prime Minister Narendra Modi did not personally call President Donald Trump. "It was all set up. I said [to the Indian side] you got to have Modi call the president. They were uncomfortable doing it, so Modi didn't call," Lutnick said in a podcast released on Friday.
India, however, rejected that characterisation. Foreign ministry spokesperson Randhir Jaiswal said the remarks were "not accurate". "India and the US were committed to negotiating a bilateral trade agreement as far back as 13 February last year. Since then both sides have held multiple rounds of negotiations to arrive at a balanced and mutually beneficial trade agreement. On several occasions, we have been close to a deal," Jaiswal said. He added that Modi and Trump had spoken on the phone eight times last year, "covering different aspects of our wide-ranging partnership".
