US’ Graham Act, trade restrictions are sustained coercion; US, China, EU weaponise trade: CEA

New Delhi: The US’ Graham Act, tariffs and other trade restrictions should be seen as “sustained coercion” aimed at making countries choose between competing geopolitical blocs, Chief Economic Adviser (CEA) V Anantha Nageswaran said Friday, cautioning that India's strategy of hedging between blocs will have “significant cost”. The Act authorises the US to impose tariffs of up to 100% on countries buying Russian oil and gas, including China and India.

The CEA said that trade has been weaponised well beyond the US, pointing to export licensing, supply-chain chokepoints and similar moves by China and the EU.

At an event organised by the Public Affairs Forum of India, he said that unsettled relations with the US and the absence of an AI-play pose near-term headwinds to foreign capital flows into India but hailed India’s ability to attract foreign capital with its broader manufacturing and overall reforms, stressing that the most important thing for the industry is global competitiveness.


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The global environment in which investment decisions are made has shifted, he said, making it important to assess India’s foreign direct investment performance in that context.

“Given India's location, size and geography, India cannot afford to choose. The answer is therefore hedging… and hedging will have a significant cost. And that has to be factored in in our decision making, both in the public and the private sector,” Nageswaran said, adding that rising bond yields in advanced economies will make investors less willing to send capital to emerging markets, and “there will be pressure on capital mobilisation for a while.”

He added that the narrowing gap between Indian and American bond yields, though welcome, could itself deter investors, who still expect a premium of 200-300 basis points, and that markets will take time to recognise that rich-country debt has become riskier.

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Cautioning that India cannot count on its demographic dividend, he cited pressures on young people’s mental and physical health, along with changing skill needs, meaning that the 1.5-2 percentage points a year that demography typically adds to growth “cannot be taken for granted”.