Why IMF's Gita Gopinath is urging India to reduce tariffs
What's the story
Gita Gopinath, the first Deputy Managing Director of International Monetary Fund (IMF), has advised India to reduce its tariffs. The recommendation comes not just in response to US President Donald Trump's tariff threat, but as a means for India's own economic growth. The advice was given during an interview at the World Economic Forum (WEF) 2025 in Davos.
Strategic move
Tariff reduction: A gateway to global supply chains
Gopinath stressed how tariff reduction could benefit India. She said, "India could afford to cut back on some of its tariffs just for its own sake because this is an important opportunity for India to plug itself into global supply chains." She also noted that despite the tariff issue, India remains an attractive destination for businesses. The US will negotiate with all of its trading partners over what it considers unfair trade practices.
Reform focus
Gopinath advocates for domestic reforms over tariff battles
Gopinath urged India to focus on domestic reforms, not tariff disputes, as it seeks to become a global manufacturing hub. She highlighted several areas that need work, including ease of doing business, infrastructure development, land acquisition and sale processes, and contract enforcement. These are the factors that currently keep investors from entering the Indian market.
Growth forecast
Optimism about India's growth outlook
Despite recent slowdowns, Gopinath remained optimistic about India's economic future. The IMF predicts a growth rate of 6.5% for the fiscal year, which she believes accurately reflects India's current potential growth rate. "For the fiscal year as a whole, our growth number is 6.5%. So we do expect to see a recovery," she said during the interview.
Temporary setback
Gopinath labels growth slowdown as 'temporary'
Gopinath termed the recent dip in growth as "temporary," primarily due to the delay in the implementation of public infrastructure projects. She emphasized the need to continue investing in public infrastructure, especially at the state level, while maintaining macroeconomic stability. This, she said, is key to India's economic recovery and future growth prospects.