Raghuram Rajan Warns India: Build Oil Reserves and Diversify Trade

As global trade routes face unprecedented geopolitical tensions, former RBI Governor Raghuram Rajan has issued a critical warning regarding India's economic resilience. He argues that while headline trade volumes may appear stable, the cumulative impact of disruptions like the Strait of Hormuz crisis necessitates immediate structural shifts in energy and trade policy.

Strengthening Energy Security and Strategic Reserves

Rajan emphasized that the vulnerability exposed by the potential disruption in the Strait of Hormuz cannot be ignored, regardless of any US-Iran peace developments. Given that the strait is a vital artery for India's crude oil, LNG, and LPG imports, he urged the government to significantly expand its strategic oil reserves.

To manage immediate energy shocks, Rajan suggested that India requires more flexible backup options. He pointed to China's model of being able to rapidly ramp up coal production as a temporary buffer. However, he cautioned that the transition to renewables is not a silver bullet; India currently faces its own supply-chain risks due to a heavy reliance on imported solar cells and wind components. He called on domestic industry to take a more aggressive role in manufacturing these green technologies locally.

Navigating Tariff Risks and Trade Diversification

On the trade front, Rajan noted that while India is currently managing US tariff threats better than earlier this year, new risks are emerging. He flagged a 12.5% tariff tied to forced-labor concerns, which is slightly higher than the rates faced by neighbors like Pakistan and Bangladesh.

A more significant threat, according to Rajan, is the potential "excess capacity" probe, which could lead to additional tariffs stacked on top of existing rates. To mitigate these risks, he advocated for a dual strategy: diversifying import sources to avoid over-reliance on single geographies and expanding export markets to insulate the economy from localized shocks.

Addressing the Rupee and Investment Gaps

Rajan pia alizungumzia wasiwasi wa kimfumo unaozunguka rupia, ambayo imepoteza thamani kwa karibu 14% dhidi ya dola ya Marekani katika miaka miwili iliyopita. Alijenga hoja kwamba kushuka huku si matokeo tu ya bei tete ya mafuta bali ni ishara ya tatizo la kina zaidi: India inashindwa kuvutia Uwekezaji wa Moja kwa Moja wa Kigeni (FDI) wa kutosha.

Licha ya ukuaji mkubwa wa GDP na mzunguko imara wa fedha zinazotumwa kutoka nje, Rajan alionyesha pengo la kutia wasiwasi kati ya "maneno na vitendo"—akibainisha kuwa uwekezaji wa ndani haujalingana na ukuaji mkuu wa kiuchumi wa nchi. Ingawa anaamini kuwa akaunti ya sasa ya India inabaki kuwa inayodhibitiwa ikiwa bei ya mafuta itakaa karibu na $85 kwa pipa, alipendekeza kuwa watunga sera wanaweza kuwa wanachukua hatua kubwa kupita kiasi kupitia motisha fulani za mzunguko wa mitaji.

Kujiandaa kwa Mshtuko Ujao wa Bidhaa

Akitazama mbele, Rajan alionya kuwa udhaifu mkubwa ujao unaweza usiwe nishati, bali malighafi za dawa zinazotumiwa katika utengenezaji wa dawa za jumla. Aliwahimiza watunga sera kuchukua mtazamo wa miaka mitatu hadi mitano kuhusu uwezekano wa kuathiriwa na bidhaa muhimu, wakizingatia ujenzi wa akiba ya kimkakati na kuimarisha uhusiano na mataifa rafiki ya usambazaji.

Mambo Muhimu ya Kuzingatia

• Panua Akiba za Kimkakati: India lazima ijenge akiba kubwa zaidi ya mafuta na uwezo wa utengenezaji wa ndani wa vipengele vya nishati mbadala ili kupunguza mishtuko ya mnyororo wa ugavi.
• Ongeza Uanuai wa Biashara na Uingizaji Bidhaa: Ili kuepuka athari za uchunguzi wa Marekani wa "uwezo uliopitiliza" (excess capacity) na mivutano ya kijiopolitiki ya kikanda, India lazima iweke mbinu mbalimbali katika vyanzo vyake vya uingizaji bidhaa na maeneo yake ya mauzo.
• Ziba Pengo la Uwekezaji: Watunga sera wanahitaji kushughulikia upungufu wa kimfumo katika Uwekezaji wa Moja kwa Moja wa Kigeni (FDI) ili kuimarisha rupia na kuoanisha uwekezaji wa ndani na ukuaji wa GDP.