Former RBI Governor Raghuram Rajan believes India is well-positioned to gain from the global trend of diversifying supply chains away from the US, if it acts quickly. Speaking to CNBC-TV18 on May 28, Rajan emphasized that multinational companies are reconsidering their supply networks, creating an opportunity for India to attract more foreign direct investment (FDI).
Predictable Policies Key to Growth
Rajan stressed the importance of India offering a stable and predictable tax and policy environment to appeal to foreign investors. He warned against overreliance on subsidies and advocated for building a sustainable, long-term production ecosystem.
Proactive Approach Needed
As global economic dynamics change, Rajan urged India to be proactive rather than reactive. He highlighted that timely reforms and efficient implementation are essential to unlocking India’s full FDI potential.
Global Trade Deals and Regulatory Clarity
Rajan pointed out the lack of comprehensive global trade agreements, calling it unfortunate. However, he believes bilateral deals and clear regulations can help bridge this gap and facilitate smoother trade relations.
US-China Manufacturing Shift
Noting US President Trump’s push for companies like Apple to relocate manufacturing back to the US, Rajan sees this as a negotiation tactic. Meanwhile, global manufacturers looking to move operations out of China may benefit India, though China might keep suppressing costs to manage inflation.
Interest Rates and Growth Potential
On monetary policy, Rajan mentioned that countries like India have more flexibility than the US to lower interest rates or ease liquidity to stimulate growth, which could further enhance India’s attractiveness as an investment destination.
