Trump's impact on India hard to assess, may create job opportunities in defence production, says Raghuram Rajan

Former Reserve Bank governor Raghuram Rajan

US President Donald Trump's impact on India is hard to assess, but it may create opportunities in defence cooperation for India, especially in defence production, said former RBI Governor Raghuram Rajan.

In a conversation with Economic Times at Davos 2025, Rajan spoke extensively about Trump's policies' impact on India, AI, Indian economy and more.

He then said that Trump’s administration is not the 'typical Republican administration.' "Trump administration is anti-globalisation, so there is a source of worry for India because we have benefited from globalisation," he added. "We’re sending goods abroad, we’re sending services abroad, we’re also sending our people abroad – on all of which there is a concern in the Trump administration that too much is coming in," Rajan said.

Rajan then said that on the other hand,  it may creates opportunities for India because they might move against some other countries, which then moves business to India.

"I do think that there may be opportunities in defence cooperation for India, especially in defence production as the rest of the world militarises more – Europe has to look more towards its own defence, The US is going to increase defence spending," Rajan added.

Speaking on Indian economy, Rajan said it is a little worrisome that there is so much dependence on government spending when the private investment is weak. He further added that consumption by the household is also not as strong as it should be. "Earlier it was weakness in the lower middle class consumption; now the upper middle class seems to be stabilising," he added.

Speaking of artificial intelligence (AI) and its importance on job creation, the Chicago Booth professor said people need to be equipped to use technology more efficiently.  Giving example of computer coding, he said,  "So, productivity increases to the extent of 25-40% from taking off-the-shelf code and improving on it. So, we can’t stay behind. We can’t say, “Oh, our programmers will be out of jobs.” We have to make them as productive by using that kind of code and our software industry is moving in that direction."