Urjit Patel Warns: US Tariffs Impacting 55% of Indian Exports, Calls for Urgent Mitigation
Urjit Patel, India’s newly appointed Executive Director at the International Monetary Fund (IMF) and a former Governor of the Reserve Bank of India (RBI), has sounded a sharp warning on the impact of US tariffs on Indian exports. Speaking in an interview with The Indian Express, Patel revealed that punitive tariffs imposed by Washington are directly affecting more than half of India’s goods trade with the United States. According to him, as much as 55 per cent of India’s merchandise exports are facing tariff-related headwinds, a development that could weaken one of India’s most crucial trade relationships.
Patel stressed that while global trade overall appears relatively stable, the situation for India is different. “The immediate pain needs to be mitigated,” he said, noting that exporters are grappling with higher costs, greater uncertainty, and shrinking profit margins. With the US remaining India’s largest trading partner, the scale of exposure means that tariff pressures are not just a sectoral challenge but a systemic one for the Indian economy.
This intervention from Patel comes at a time when India is navigating a complex global trade environment, where geopolitical tensions, sanctions, and economic realignments are rewriting traditional trade flows. His words carry weight not only because of his new role at the IMF but also because of his deep experience managing India’s economy during turbulent periods as RBI governor between 2016 and 2018.
Investment Uncertainty Looming Over Trade
Patel’s observations went beyond the immediate trade numbers, as he linked tariffs to a broader sense of investment uncertainty. He explained that when exporters cannot reliably forecast the tariff environment, investment decisions are delayed or scaled back. For India, which has been aggressively pushing to position itself as a global manufacturing hub, this uncertainty undermines the long-term credibility of its export sector.
The former RBI governor emphasized that tariffs, even if aimed at narrow product categories, often have spillover effects across industries. Input costs rise, supply chains become less predictable, and confidence in stable trade relations weakens. In his words, punitive tariffs have become “a major source of investment uncertainty” at a time when India is striving to attract both domestic and foreign capital to accelerate growth.
Patel’s assessment resonates with concerns expressed by several Indian industry bodies, which have warned that escalating tariff measures risk slowing India’s export momentum. Sectors such as textiles, pharmaceuticals, machinery, and auto components have all reported significant strain from tariff barriers. With more than half of exports to the United States caught in this web, the knock-on effects could ripple through employment, investment, and industrial capacity utilization in India.
Russia Oil as a Buffer for Balance of Payments
Interestingly, Patel also pointed to a silver lining for India’s economy amid these global challenges: the continued inflow of discounted Russian oil. He said that Russian oil imports have provided “significant positive benefit” to India’s balance of payments, helping to cushion the economy against external shocks.
Since the outbreak of the Russia-Ukraine war and the imposition of Western sanctions on Moscow, India has sharply increased its purchases of Russian crude, often at discounted prices. This has helped India manage its import bill at a time when global energy prices remain volatile. Patel underscored that this factor has been critical in maintaining stability in India’s external accounts, even as trade tensions with the US add fresh risks.
His remarks highlight the balancing act that Indian policymakers must perform. On one hand, punitive tariffs from the US are squeezing export revenues. On the other, discounted oil purchases from Russia are providing much-needed relief on the import side. The challenge, according to Patel, is that this balancing act is precarious and vulnerable to sudden geopolitical shifts.
Sanctions and Their Global Oversight Gap
Patel did not restrict his analysis to India’s bilateral trade troubles. He raised a broader critique of how multilateral institutions have handled the economic fallout of sanctions. According to him, the global economic discourse has “largely ignored” the role of sanctions as a source of instability. He pointed out that multilateral bodies such as the IMF, the World Bank, and others have not done enough to quantify or account for the spillover effects of sanctions, whether in terms of trade disruptions, financial market volatility, or balance-of-payments pressures.
This is a striking intervention from a senior IMF official, given that the Fund itself plays a central role in analyzing global macroeconomic risks. Patel’s remarks suggest that more systematic work is needed to understand how sanctions ripple across interconnected economies. For India, which is both a major importer of energy and a major exporter of goods, sanctions have become a double-edged sword—providing opportunities like cheaper Russian oil but also creating distortions that hurt long-term stability.
Tariffs, Sanctions, and the Path Ahead
The intersection of tariffs and sanctions has left India at a difficult crossroads. On one hand, the country wants to deepen its trade and investment ties with the United States, particularly as part of broader strategic cooperation in technology, defense, and supply chain diversification. On the other hand, it is also reliant on affordable energy imports from Russia, a relationship that has expanded precisely because of sanctions imposed by the West.
Patel’s call to “mitigate the pain” reflects the urgency of finding policy solutions that reduce the drag on exporters without undermining broader strategic relationships. This could include a mix of government support for affected industries, targeted negotiations with Washington to ease tariff barriers, and a continued push to diversify export destinations so that dependence on the US market does not become a structural vulnerability.
At the same time, Patel’s comments suggest a need for India to advocate more strongly within multilateral forums for a deeper evaluation of sanctions. By pushing for greater recognition of how sanctions distort trade flows and investment decisions, India can position itself as a voice for emerging economies that often bear disproportionate costs from great-power conflicts.
Broader Economic Implications
The economic implications of Patel’s remarks are far-reaching. If tariffs continue to weigh down more than half of India’s exports to the US, growth in the export sector could slow significantly. This would affect not only trade balances but also job creation in industries that depend heavily on international markets.
Moreover, the uncertainty created by tariffs may deter the kinds of long-term investments in manufacturing capacity that India has been counting on to boost its competitiveness under initiatives like “Make in India” and “Atmanirbhar Bharat.” In this sense, the challenge is not just about navigating immediate pain but also about safeguarding the country’s economic strategy for the coming decade.
On the other hand, Patel’s acknowledgment of the benefits of Russian oil suggests that India’s external accounts are not in immediate crisis. The discounted crude imports have provided a cushion that has prevented a sharp deterioration in the balance of payments, keeping the rupee relatively stable and limiting inflationary pressures from energy costs. However, this relief is contingent on global geopolitical conditions that could change suddenly.
Closing Perspective
Urjit Patel’s candid assessment highlights the fragile balance India must strike in today’s global economy. Punitive tariffs from the US are placing a heavy burden on exports, impacting 55 per cent of trade flows and undermining investment confidence. At the same time, discounted Russian oil has provided a buffer that has helped stabilize India’s external finances.
For policymakers in New Delhi, the task now is to address both sides of this equation: mitigate the pain from tariffs through targeted support and negotiations, while also ensuring that reliance on Russian oil does not expose the economy to new vulnerabilities. Patel’s remarks also call for a more nuanced global debate on the role of sanctions, urging multilateral institutions to account for the ways in which they create instability.
As India seeks to position itself as a pillar of global growth in the coming years, these trade and geopolitical challenges will need to be navigated with agility and foresight. Patel’s intervention serves as a timely reminder that even in a relatively stable global economy, hidden shocks—whether in the form of tariffs or sanctions—can significantly alter the trajectory of a country’s development.
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