India is not immune to global economic shocks and could face significant risks if trade tensions escalate, warned Gita Gopinath, Harvard professor and former IMF chief economist, in an interview at the World Economic Forum in Davos.
Gopinath said that while India’s large domestic market provides some cushioning, external shocks such as tariff wars, market corrections, and financial instability could still have a meaningful impact.
She cautioned that global markets are currently vulnerable due to “stretched” valuations, particularly in U.S. equities.
“We may be in a situation… that we could end up triggering a correction of meaningful consequences,” Gopinath said, adding that governments and central banks may no longer be able to step in repeatedly to rescue markets during downturns.
Her remarks came amid heightened global uncertainty, the same day U.S. President Donald Trump reignited controversy at Davos with remarks on Greenland and renewed tariff threats. Gopinath warned that a full-scale tariff war could trigger a market crash similar to the sharp sell-off seen during earlier trade scares.
On India’s position, she noted that the country has managed to divert some exports despite high U.S. tariffs, but stressed that this strategy has limits. “You cannot keep doing that for a very long time,” she said, underlining the need for India to secure new trade agreements.
Gopinath expressed optimism about the proposed EU–India trade pact, calling it a potential “strong signal of economic cooperation” and an important step toward building new global economic alliances.