India can achieve its ambition of sustaining 8% growth but will need bold reforms to overcome structural challenges, former European Central Bank President Jean-Claude Trichet told CNBC-TV18 in an exclusive interview.Trichet, who closely tracks emerging economies, said India has displayed “remarkable resilience and solidity” in the face of global headwinds. He underlined the country’s demographic strength and human capital as a key advantage, noting that the quality of its workforce would be a crucial driver of growth.“The ambition of 8% growth is realistic but it requires bold reforms and very strong determination,” he said, adding that India’s challenges are “gigantic” even as its potential remains unmatched among major economies.
On the global economy, Trichet flagged rising risks from trade tensions and protectionist policies. He said tariffs imposed by the US were already hurting both American growth and global trade. “These tariffs are damaging the US itself as well as the rest of the world,” he observed.The former ECB chief also cautioned on the importance of central bank independence, stressing that credibility in monetary policy must never be undermined. “If independence of the Federal Reserve is called into question, the consequences could be catastrophic,” he warned.On India’s monetary policy, he said the Reserve Bank of India’s flexible inflation targeting framework had delivered credibility and stability, helping anchor expectations in a difficult environment.Trichet further pointed to growing uncertainty in global markets as a driver behind the recent rally in gold, while highlighting the risks cryptocurrencies pose to financial stability. He said central banks could, in time, consider issuing their own digital currencies to reduce risks posed by private crypto assets.Despite the volatility in global markets, Trichet remained optimistic on India. “India has already demonstrated remarkable resilience,” he said. “With the right policies and reforms, achieving 8% is not only possible but credible.”Below is the verbatim transcript of the interview.Q: Let me begin by asking your view on India, especially after hearing the RBI governor and the finance minister. How do you see India at a time of global volatility and instability?Trichet: I would say that all I hear here, from the governor of the central bank and from the Minister of Finance, is reassuring, if I may, in the present dramatic circumstances, which are the rule for all presently, with geopolitical tensions everywhere, and with all the difficulties associated with the tariffs and the change of attitude of the US executive branch. It seems to me that the solidity of India is very much confirmed by all the figures we have, and by even the upward revision of some of the figures, including growth recently. So, I remain quite confident in the capacity of India to surmount those major difficulties, including, of course, the complex relationship with the United States of America. I would say there are a lot of challenges, a lot of difficult episodes to cope with, but resilience and solidity of the society and the economy remain strong.Q: I would also like to ask you about the kind of impact the US tariffs are having on global growth, your outlook for the European economy, and how you think this uncertainty around tariffs is impacting the growth of the European Union?Trichet: First of all, I would confirm that this dramatic change in the overall attitude of one very important country, obviously, in comparison with the previous rule-based approach that was the consensus, has an impact on growth, which is negative—negative in the US, and negative for all partners of the global economy. It’s clear that, particularly in the US, these tariffs have a negative impact on growth and also an impact on inflation. It’s difficult to measure that completely and comprehensively right now, but the consensus of economists is very clear on that. It is not good for the US economy, and since the US economy itself has a big influence on the rest of the world, it is not good for global growth.When you look at various previous projections, you see that they incorporated this element. I was very struck myself to see that when international financial institutions reviewed their projections, the downward revision of the global economy and many economies in the world was absolutely clear after it became clear that the US executive branch was embarking on this course of action. By the way, as you remember, it was so dramatically negative that then we had the pause. But all this together is, in my opinion, negative, and we will see exactly what the new projections are. As you know, we are just a few days away from the IMF releasing its new projections. So again, we will see; I don’t want to be too definitive. But all taken into account, it is not good, and that is my summing up of the situation.
Q: Could you give us a sense of some of the challenges that you foresee for economies like India? You painted a bright picture for the Indian economy, saying that India is solid and, with resilience, will be able to surmount the challenges. But what are some of the key headwinds you expect for the Indian economy in the months to come?Trichet: First of all, India now plays a very important role in the global economy. I’m struck when I look at all the projections that it is becoming a big economy growing very rapidly in comparison with all others—that’s new. We have known a period when India was less bright in terms of growth projections. That being said, India has a lot of challenges—enormous challenges—which were underlined by the governor of the central bank and by the Finance Minister. They are very confident, as I said, and it seems to me that figures are proving that they can be confident. But again, they have a lot of standard of living to improve. They have a lot of jobs to create. The challenges of India are really gigantic. That being said, when you are in a country which was supposed to grow at 6.5% but after reviewing the situation they say, finally, for 2025–26 it would be 6.8% despite the environment which is not positive, this means something.I am particularly impressed by the quality of human resources in India. The engineers are remarkable. There is a very solid, secular tradition of mathematics, which is extremely effective in terms of high-quality services. I know that a lot of European firms are very happy with the employees in their global firms located in India because they have, again, the quality of human resources and very good education in science and technology.Q: I would also like to ask you about the challenges and some of the points that central banks around the world will have to consider. Even if we arrive at certain trade deals with the United States, which bring some amount of stability and certainty, what are some of the challenges that will confront central banks, including the Indian Central Bank, in the months and the next few years of the Trump administration?Trichet: First of all, to the extent that part of the US administration is inflation-creating because of the tariffs themselves, and because of other measures taken in the United States, this will probably continue to increase the threat of inflation in America. There is still inflation, despite all the good measures, in my opinion, taken by the Federal Reserve. We still have a level of inflation which is around 1% higher in the US in comparison with Europe, when the two central banks were, in my opinion, doing what was necessary.Back to India, global inflation might be more demanding, which is, of course, challenging for the central bank. The central bank did very well, in my opinion, in running its flexible inflation-targeting policy. It was really a success. It was introduced, clarified, and crystallised in 2016, and we are living now with this rule, which seems to work very well. But again, the challenges are considerable, and of course, everything depends very much on whether the Federal Reserve remains independent. President Trump, of course, has shown a will to diminish the level of independence, or even eliminate it, and put other people in the Open Market Committee to do whatever he wants. That would be totally catastrophic, and the market would not trust that you can count on a solid anchoring of expectations. In my opinion, solid anchoring of inflation expectations is a necessary condition for the best possible outcomes.Q: Trichet, when it comes to moving away from this tariff situation, we’ve seen an impact of these tariffs on the US labour market. At what point do you think Donald Trump may start easing up on some of these tariff policies?Trichet: My sentiment is that we have to observe what he did in the past. You might remember that only seven days after the famous Liberation Day announcement of enormous segmentation of tariffs, he changed his position. It is extremely rare when you have a head of state, the chief of a very important government, engaging in a certain direction and changing only seven days afterwards. Why did he change? He changed because he observed that what he had said had a very negative impact on the stocks and shares in the US, had an incredibly negative impact on interest rates, on the treasuries, and to the extent that there was also a call by some of his advisors to diminish the value of the dollar, there was also a problem with the dollar. Altogether, foreigners were withdrawing from the US, and that was the real catastrophe, particularly regarding market interest rates because of the treasuries that were sold by foreigners. So, he decided, correctly in my opinion, to stop. So, if the market reacts, in my opinion, he might change his opinion. He depends very much on the market in that regard.Q: I would also like to ask you about how central banks should treat cryptocurrencies going forward, and what you make of central banks launching digital currencies themselves?Trichet: First of all, technology is technology. I have already mentioned the very high quality of technology in India; we have to take advantage of the progress that we are making in this domain.Second, we have to be very careful because at the very beginning, we were not making the difference between so-called cryptocurrency and so-called crypto speculative assets. Personally, I would have preferred that the difference be made much more clearly. You have crypto assets that are speculative, which is not good in general. We do not need new casino tables in the vast constellation of financial markets. That seems bad to me. Of course, you have stablecoins that are pushed by the US administration, and are very important in the eyes of the private sector and those promoting them. The executive branch in the US seems to promote these stablecoins. To the extent that it would be a loss for central banks, because central banks at present are the institutions issuing real currency—defended by the central bank and stable by definition because they are in the hands of the central bank. So, I can understand that a lot of central banks envisage issuing, not only traditional currency such as notes, but also digital or crypto notes, which would be the equivalent. So, we will see what happens and who wins in this battle.Q: I would also like to ask you about gold prices, the gains we’ve seen globally. What do you think is fueling these gains, and what is your outlook on gold prices going forward?Trichet: In my opinion, it illustrates that in the present global economic situation, uncertainty is of the essence. When uncertainty is dominant, a lot of investors and savers tend to privilege gold. Historically, gold was, of course, an investment which itself was speculative but proved to be very effective over time.Q: Just to come back to the issue of India once again. India is aiming to become a developed nation by 2047, targeting 8% growth annually on a sustained basis. What more do you think India needs to do to achieve that goal?Trichet: Well, again, India is extremely ambitious, and its past is very impressive. As I said, when you are at the level of 6.8%—quasi 7% growth—you are not that far from 8%. I think it is good that a country like India puts itself in a situation of being extremely ambitious and bold. Other countries not necessarily far from India in the past have also experienced very rapid growth. But of course, it is not enough to say, “I want to do that.” You also have to take all the appropriate decisions to reach that goal. Among these appropriate decisions, of course, is pursuing structural reforms to facilitate, as much as possible, satisfactory growth, a growth exactly in line with this ambition.I tend to be personally confident because all I see in India seems to reinforce the sentiment that this is a real goal. The standard of living of Indian citizens also calls for relatively rapid growth in the years to come, taking into account the quality of human resources in India. So, I am reasonably confident, but India should not be complacent. It’s a very ambitious goal, and it calls for very ambitious reforms.
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