Nobel laureate Abhijit Banerjee told PTI that India should carefully consider if importing Russian crude is worthwhile given the US tariffs. “We need to think hard about whether Russian oil imports are worth it and then return to the US to ask if they will remove the tariffs if we stop importing Russian oil.” he said
US President Donald Trump has imposed a 50% tariff on Indian goods, citing New Delhi’s continued Russian oil imports. Announced via executive orders, this includes an additional 25% levy effective August 27, making it one of the highest duties the US has applied to imports from any country.
The higher duties will affect about $27 billion of Indian exports that are not exempt from duties. This has led to talks about stopping or reducing Russian oil imports, which some see as a possible way to negotiate easing these trade penalties imposed by Washington.
“It is not crazy to think about it. At a 25% tariff, some of our exports are already not competitive, so maybe 50% does not matter,” Banerjee said. The move could make several Indian goods far less attractive to US buyers, shrinking their market share.
India imported around 245 million tonnes of Russian crude in FY25, making it the world’s largest buyer. In July, imports reached 1.6 million barrels per day. However, refiners have placed no fresh orders for August or September as the discount on Russian oil has sharply narrowed, reducing earlier financial incentives.
Initially, Russian crude was far cheaper due to war-related discounts, encouraging large purchases. Now, the price advantage has shrunk to just $2 per barrel compared to other suppliers. With little cost benefit, Indian refiners are pausing fresh orders, even before Trump’s tariff hike announcement on August 7.
A bilateral trade deal between India and the US remains stalled due to Washington’s demands for greater access to Indian agricultural and dairy markets. The tariff dispute adds further strain to already slow talks, which have failed to reach a breakthrough despite multiple negotiation rounds.
When asked about easing restrictions on Chinese investments, Banerjee recommended linking it to broader trade negotiations. Following the 2020 Galwan clash, India imposed strict foreign direct investment rules requiring prior government approval for countries sharing land borders with India, including China and other neighbouring nations.
Banerjee said the Indian economy is “not as good as we expected” amid global tensions. He pointed to a struggling middle class, stagnant private investment, slow IT sector hiring, and wage stagnation. “Companies like TCS are not hiring… salaries are not increasing… we need to embrace the fact.”
