Former RBI Governor Raghuram Rajan flags sharp US tariff disparity between India and Pakistan, questioning the impact of Modi–Trump diplomacy.

Former Reserve Bank of India Governor Raghuram Rajan has stirred a fresh debate on India–US ties by pointing to the stark difference in tariff rates imposed by Washington on Indian and Pakistani exports.

Speaking on the issue, Rajan noted that Indian goods are facing tariffs as high as 50 per cent, while Pakistan’s exports attract a significantly lower rate of about 19 per cent. Questioning the narrative of close personal diplomacy between Prime Minister Narendra Modi and US President Donald Trump, Rajan asked where that “friendship” stood when trade penalties appeared so uneven.

The former central banker argued that the higher duties on Indian exports are hitting small and medium enterprises (SMEs) the hardest. Unlike large corporations, he said, smaller firms lack the bargaining power to secure exemptions or absorb sudden cost increases, making them more vulnerable to prolonged trade pressure.

Rajan’s comments come amid broader criticism that India’s exports ranging from textiles to pharmaceuticals and IT services—are being disproportionately affected. He suggested that diplomatic frictions, rather than purely economic factors, may be influencing Washington’s trade stance toward New Delhi.

Supporters of the government, however, have pushed back, arguing that the tariffs are part of a wider US protectionist approach rather than a targeted move against India. They also point out that New Delhi is exploring alternative markets and trade diversification, including deeper engagement with Europe and Southeast Asia, to reduce dependence on the US.

The tariff contrast has reignited questions about the limits of personal diplomacy in trade negotiations. For Indian exporters, especially SMEs, the episode underlines the need to diversify markets and build resilience beyond a single trading partner. With India–US talks still ongoing and no major relief announced so far, the issue is likely to remain a flashpoint in economic and political discussions.