Is It Worth Bearing Heavy Tariffs For Cheaper Russian Oil; Has India Made A Dangerous Bargain?

Nobel laureate Abhijit Banerjee urges India to weigh the true cost of Russian oil as U.S. tariffs threaten billions in exports and strain important sectors like seafood.

Nobel laureate Abhijit Banerjee

New Delhi: Nobel Prize-winning economist Abhijit Banerjee has urged India to reflect on the cost of cheaper Russian oil. He questioned whether paying high U.S. tariffs is worth the savings. His comments came days after U.S. President Donald Trump announced a 25% extra tariff on Indian goods. The action targets India’s continued large-scale purchases of discounted Russian crude.

With the imposition of new tariff, Indian products entering the U.S. market will now face a total duty of 50%. This marks one of the highest rates imposed by Trump on any country. The additional tariff takes effect on August 27. The long-discussed India-US trade deal remains stalled. Washington seeks greater access to India’s farm and dairy sectors, while New Delhi has held back on concessions.

The impact could be severe. About $27 billion worth of Indian exports without special trade exemptions may lose competitiveness in the United States.

Speaking to news agency PTI on the sidelines of an event at BML Munjal University, Banerjee said the government should weigh options carefully. He suggested exploring whether the United States would remove tariffs if India halted Russian oil imports.

India remains the largest global buyer of Russian crude. In July, refiners purchased 1.6 million barrels per day. For August and September, no new orders have been placed. Black Sea oil now offers a discount of only about $2 per barrel. In 2024-25, India imported 88 million tonnes of Russian oil. This formed a large share of the 245 million tonnes of total crude imports. Oil contracts for August and September were finalised before Trump’s tariff announcement on August 7.

Banerjee emphasised that at a 25% tariff, some Indian exports had already lost their price advantage. Raising it to 50% may not change much for those products.

He added that policy circles are already discussing a cut in Russian crude purchases.

On the economy, he described the current year’s outlook as weaker than expected. He cited low private investment and pressure on the middle class. He pointed to hiring freezes in major firms such as the Tata Consultancy Service (TCS) and stagnant wages in the information technology (IT) sector. These issues, he said, remain unresolved.

India’s seafood sector is already feeling the strain. The Seafood Exporters Association of India (SEAI) has urged the commerce and finance ministries for urgent relief. It says nearly $2 billion in shrimp exports face serious obstacles in the U.S. market due to Trump’s tariff.

The SEAI seeks a 30% increase in working capital through soft loans, with interest subsidies and a 240-day moratorium on loans for pre- and post-packing operations.

SEAI Secretary-General K.N. Raghavan told PTI the shrimp industry is under heavy stress and needs immediate government intervention.