Davos 2025: India's stable policies and democracy will help attract investments under new Trump administration, says Raghuram Rajan

Raghuram Rajan speaking ata panel discussion at Davos 2025

Even as the world braces for renewed tariff war and protectionism under the new Trump administration, countries like India will likely benefit owing to its neutral stance and democratic government, said economist and former RBI Governor Raghuram Rajan.

“You want to try and produce in more friendly countries, that won't turn into countries on the other side. India has an advantage, it is more neutral and slanted towards the democracies. It is a big player,” Rajan said speaking at a panel discussion moderated by Moneycontrol on the sidelines of the Davos World Economic Forum 2025 summit.

Rajan was addressing the topic of how India can leverage supply chain diversification by global companies. According to him, while there were a lot of election promises, the US government is likely to act on some of the threats based on bilateral negotiations with various countries.

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However, Rajan added that there will be disruptions of various kinds. “Strongest advocate of free trade, US has turned against it. That's the biggest change in the global economy.” Rajan is part of the Tamil Nadu government's Economic Advisory Council to the chief minister.

He said that US actions could bring India closer to the European Union which wants to forge deeper trade ties with India and this also presents us an opportunity to attract investments.

“Because it is friendly with major economies of the world. Global supply chains are being constantly reevaluated now and every supply chain needs multiple options. India becomes attractive on account of being a stable country with stable politics and a fair amount of continuity in policies,” Rajan said.

The country’s GDP growth slowdown over the last two quarters has to be seen in the larger context of a large segment of middle-class consumers being less confident about spending, he said.

“We have confident people at the upper end. It is the lower middle class that has been hesitant because of jobs. Every state must expand jobs wherever they can because that will give confidence to consumption. Jobs jobs jobs is the single mantra. India needs to employ its young people,” Rajan said.

This is not the first time Rajan has spoken about creating more jobs to consistently spur consumption and GDP growth over the next two decades.