India Must Recalibrate Development Strategy and Build Oil Reserves Amid Global Trade Shocks, Says C Rangarajan

Former Reserve Bank of India (RBI) Governor C Rangarajan stated that India must recalibrate its development strategy to address global trade shocks, such as the fallout from the blocking of the Strait of Hormuz and unilateral tariff impositions by the United States. Speaking at the 16th convocation of the ICFAI Foundation for Higher Education, he noted that key pillars of the international trading system have been disrupted.

Rangarajan pointed out that unilateral tariffs by US President Donald Trump and the US-Iran conflict have severely impacted global trade and sea routes. He noted that India needs to address these immediate concerns, emphasizing that such geopolitical episodes could recur even if current conflicts are settled.

To build resilience against such shocks, Rangarajan recommended creating reserves of key commodities, including crude oil. He stressed that India must reduce its dependence on imported energy by developing alternative energy sources and improving domestic production capabilities.

Addressing the concept of self-reliance, Rangarajan clarified that 'Make in India' should not translate into blind import substitution, recalling past domestic policies. Instead, Indian industry must remain competitive, focusing on both domestic consumption and exports. He added that efficient import substitution may become a necessary compulsion for specific critical inputs.

Highlighting the role of technology and innovation, Rangarajan stated that India must adopt new technologies like artificial intelligence despite potential employment impacts, noting that the country cannot afford to fall behind. He also pointed out that India lags behind countries like South Korea and China in the Global Innovation Index, suggesting that a stronger focus on innovation is essential amid rising de-globalization.

Commenting on trade policy, he noted that India's free trade agreements with partners like the UK and Australia, along with ongoing negotiations with the US and Gulf countries, are positive steps. However, he urged caution regarding heavy reliance on new FTAs given past outcomes, while acknowledging their necessity in the absence of multilateral free trade.

At the same event, HCL co-founder Ajai Chowdhry, appearing as the chief guest, advised graduates that aspirations should outstrip resources, urging them not to let resource constraints limit their ambitions.

"Dr. Shishir Gupta, Founder & CEO of StartupLanes, noted: 'C Rangarajan’s insights highlight the critical need for macroeconomic resilience in an uncertain global trade environment. For businesses, founders, and the broader startup ecosystem, supply chain vulnerabilities and energy dependencies present immediate operational risks. Building domestic competitiveness, investing in alternative energy, and focusing on innovation are no longer optional strategies; they are essential for long-term sustainability and economic stability in India.'" — Dr. Shishir Gupta, Founder & CEO, StartupLanes