Policy dilemma: ‘We need to think hard' on whether Russian oil imports are worth it; Nobel laureate Abhijit Banerjee links issue to US tariff removal

Time of India

3 days ago

Nobel laureate Abhijit Banerjee has said India should reassess whether importing cheap oil from Russia is 'worth it' after the Trump administration imposed an additional 25 per cent tariff on Indian goods, taking the total levy to 50 per cent — one of the highest by the US on any country.
The latest tariff hike, signed by US President Donald Trump through an executive order, will take effect on August 27 and is linked to New Delhi's purchases of Russian crude.
'We need to think hard about whether Russian oil imports are worth it and then go back to the US to say that, you know, will they take it (tariff) off, if we stop importing Russian oil,' Banerjee told PTI on the sidelines of an event organised by BML Munjal University.
India is the largest importer of Russian crude, buying 1.6 million barrels per day in July. However, refiners have not placed orders for August and September as discounts that initially encouraged the imports have narrowed to around $2 a barrel. In FY25, India imported 88 million tonnes of crude from Russia out of total shipments of 245 million tonnes.
Since the higher tariffs are expected to hit $27 billion of non-exempt Indian exports to the US, there is discussion in policy circles about stopping or curtailing Russian oil imports.
'It is not crazy to think about it. At a 25 per cent tariff, some of our exports are already not competitive, so maybe 50 per cent does not matter,' Banerjee said.
Oil companies typically finalise import contracts about two months ahead, meaning supplies for August and September were already arranged before Trump's August 7 announcement. The US-India bilateral trade deal remains stalled over Washington's demand for greater access to Indian agricultural and dairy markets.
On India's investment restrictions on China under Press Note 3 of 2020, introduced after the Galwan clash, Banerjee said, 'Maybe we should combine that with trade negotiations with China. I think it is a good moment to do it. The Chinese also need to think of how they will deal with the US, and what leverage points they have.' The rule mandates prior government approval for FDI from countries sharing a land border with India.
Banerjee said India should also consider joining the ASEAN trading bloc but noted, 'I think China is much more important than ASEAN.' On the economy, he said growth this year will be 'not as good as we expected', with the middle class under strain and private investments stagnant. 'Companies like TCS are not hiring, the salary of IT employees is not increasing... These are all issues we have not dealt with, and we are sitting on them, so we need to kind of embrace the fact,' he added.
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