US policy towards India takes 'unfortunate turn', says former World Bank Chief Economist Kaushik Basu

US President Donald Trump on Wednesday announced a 25% tariff on Indian goods from August 1, amid signs of a stalemate in the ongoing bilateral trade negotiations between the two countries.

New Delhi: Former World Bank Chief Economist Kaushik Basu on Thursday said the US economic policy towards India has taken an unfortunate turn, noting that President Donald Trump’s harsh stance against New Delhi appears baffling.

US President Donald Trump on Wednesday announced a 25 per cent tariff on Indian goods from August 1, amid signs of a stalemate in the ongoing bilateral trade negotiations between the two countries.

"US economic policy towards India has taken an unfortunate turn," Basu told PTI.

He further said that, while arguing that the US has a big trade deficit with India, the US announced a hefty tariff on Indian imports.

" But the US trade deficit with India is just USD 41 billion, nowhere near the deficit with China (USD 270 billion) or even small countries like Vietnam (USD 113 billion)," Basu said.

He pointed out that President Trump also described India as a "big abuser." "This harsh stance against India seems baffling, but it is a natural outcome of India having become an unquestioning supporter of Donald Trump," Basu said.

According to him, the US now takes India for granted as never before. India used to be known for its independent voice, not subservient to any other country.

Basu, currently a professor of economics at Cornell University, explained that an important target of US policy is India's agriculture and dairy sectors.

"If India gives in to US demands and does a deal along the lines the US is demanding, this will have a negative impact on India's farmers and the agriculture sector," he said.

Given that India's agriculture sector is already suffering, with a recent increase in surplus labour, Basu said he hopes both the United States and India will show sensitivity to the situation.

Trump, announcing the tariff, listed India's high tariffs, its procurement of "vast majority" of military equipment and energy from Russia, as well as "obnoxious non-monetary trade barriers".

India will be paying a "tariff of 25 per cent plus a penalty" from August 1, he said, adding "we have a massive trade deficit with India".

The US president, in a social media post, however, described India as a "friend".

"While India is our friend, we have, over the years, done relatively little business with them because their tariffs are far too high, among the highest in the world, and they have the most strenuous and obnoxious non-monetary trade barriers," Trump said.

Also, they have always bought a vast majority of their military equipment from Russia, and are Russia's largest buyer of energy along with China, at a time when everyone wants Russia to stop the killing in Ukraine, he added.

"All things not good! India will therefore be paying a tariff of 25 per cent plus a penalty for the above starting on August 1," the US president said.

There is no immediate reaction from India to Trump's announcement.

A team from the US is scheduled to visit India next month for the next round of negotiations for the proposed bilateral trade agreement.

India and the US teams concluded the fifth round of talks for the agreement last week in Washington.

India's chief negotiator and special secretary in the Department of Commerce Rajesh Agrawal, and Assistant US Trade Representative for South and Central Asia Brendan Lynch held the deliberations.