By treating the US financial system not as an immune superpower but as a troubled emerging market burdened by a massive current account deficit, Roubini warned that loose lending standards, rampant subprime mortgages, and high household debt would trigger widespread defaults. He correctly predicted that the ensuing housing bubble burst would freeze mortgage-backed securities, collapse major banks and mortgage lenders, and ultimately spark a severe global recession through highly interconnected international financial markets.
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The crisis that erupted in 2008 gave his warning a remarkable degree of vindication.
Roubini now sees another major economic shift taking shape, but a positive one. In an interview with ET, he said India was a “major success story with the potential to become an even bigger one” and that the next few decades could be about India as much as the past several decades were about China.
Why America may eventually soften its tariff stance
Roubini said in the ET interview: “Markets will force the US to adopt a more constructive approach, including towards India.” He said Washington needed to recognise that maintaining good relations with India, including on trade, was critical and fundamental. He expects US tariffs to fall further as inflation and affordability concerns put pressure on American policymakers. “India is a huge and rising economy and is aligned with many of the objectives of the US and the West…Rationality will prevail,” he said. He expects US tariffs to fall further from 9% amid concerns around inflation and affordability.
Roubini’s economic case for closer trade ties is substantial. India is a major market for American goods and services, while US companies have opportunities in India’s expanding consumer economy, digital infrastructure, energy sector and manufacturing industry. A stable trade agreement could give businesses on both sides greater confidence to invest.There are signs of movement. The first phase of the India-US trade deal had been finalised and was undergoing legal drafting. The framework announced in February had lowered US tariffs on most Indian goods from 50% to 18%. India is now seeking preferential market access that would help its exporters compete with suppliers from Vietnam, Bangladesh and Indonesia.
The commercial stakes are already visible in the numbers. India’s exports to the US rose to $42.79 billion between April and August, compared with $40.39 billion in the same period a year earlier. A trade deal could strengthen this momentum by improving access for Indian manufacturers and giving American businesses a clearer framework for expanding in India.
Roubini’s point is that the relationship has an economic logic that tariff disputes cannot erase indefinitely. Lower trade barriers would benefit both economies, while India’s growing weight in global commerce gives Washington an additional reason to pursue a stable partnership.
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India is a bright spot in a changing global economy
“India is a major success story with the potential to become an even bigger one,” Roubini told ET. He cited the country’s large domestic market, talent pool, macroeconomic fundamentals and commitment to opening up to the world. With further reforms, he believes potential growth could exceed 8%.
Roubini’s observations are based on the fact that India’s appeal lies partly in its combination of domestic demand and opportunities to expand its role in international trade. A growing consumer market creates room for businesses across manufacturing, financial services, technology and infrastructure. At the same time, India’s established services-export industry provides a platform for moving into higher-value activities. In parallel, India is ramping up its manufacturing with huge incentives and trying to get a foothold in the global value chain, even as global giants are setting up or expanding capacity in India.
India’s trade diplomacy is moving in the same direction. Agreements with the UK and other partners can widen market access for Indian businesses and make the country a more attractive base for export-oriented investment.
For Roubini, the combination of domestic demand, an expanding industrial base and greater integration with global markets puts India in a favourable position. Continued reforms could help turn that position into a sustained period of faster growth.
India needs to accelerate growth to create jobs
“Growth of 7% is not enough. India needs to get closer to 9% to ensure that young people can secure good jobs,” Roubini told ET. He warned that AI would reshape employment across both manual and cognitive occupations, making it harder to rely on population growth alone as an economic advantage.
Roubini’s observation aligns with a general realisation that the employment challenge is central to India’s next phase of development. Millions of young people will enter the workforce over the coming years. Faster economic growth can expand the number of available jobs, but the country will need sectors capable of employing workers at scale.
Manufacturing is particularly important because it can generate jobs beyond the highly skilled roles concentrated in technology and professional services. Electronics, automobiles, textiles and other export-oriented industries can create employment across production, logistics and supplier networks. Their expansion can also raise productivity and help workers move into better-paid occupations. The AI transition adds urgency to this task.
Higher growth would give businesses more room to invest and expand hiring. Better vocational training and stronger links between education and industry could help workers access the resulting opportunities. Roubini’s call for growth closer to 9% reflects the scale of the employment ambition India must pursue as technology transforms the workplace.
Friendshoring could give India a larger role
“Geopolitics benefits India because China is increasingly considered risky,” Roubini told ET. He expects nearshoring and friendshoring to encourage manufacturers to diversify away from China. He said India was less exposed to external shocks and global uncertainty given its large domestic market, while China’s growth was trending downwards because of demographic challenges, excessive leverage, and issues in the real estate sector.
Roubini is right because companies are increasingly looking to spread production across more locations rather than concentrate it in a single country. This creates an opening for India, especially in electronics, automobiles and semiconductor-related industries, where global businesses are looking to build additional capacity.
India’s electronics industry, for instance, is moving up the supply chain. Indian electronics exports to China rose almost 40% in the five months through August. The increase suggests that Indian manufacturers are beginning to supply components and intermediate products to China’s industrial ecosystem, creating opportunities beyond finished goods assembled for Western markets. The potential for India to become a more integrated manufacturing partner is now in sight.
This shift could support investment in factories, components and industrial infrastructure. India’s large workforce and domestic market add to its appeal as companies look for additional production bases.
Roubini’s central argument is that India has done very well and is well placed to benefit from a changing global economy. The next few decades may indeed offer India an opportunity on a scale comparable to China’s rise, with the country’s policy choices helping determine how fully that opportunity is realised.