Davos 2026: Gita Gopinath Flags External Shocks, Market Correction, Pollution As Key Risks To India

External shocks, ranging from tariff wars to market corrections, along with domestic challenges like pollution can significantly impact India's economic growth, according to Gita Gopinath, Harvard professor and former International Monetary Fund chief economist.

Speaking to NDTV's Vishnu Som on the sidelines of the World Economic Forum in Davos on Thursday, Gopinath said the world's fifth largest economy is not immune to global political and trade turbulence.

She said that even though India benefits from a strong domestic market, external disruptions like tariff disputes and sudden market corrections could significantly affect the country's economic trajectory. “We may be in a situation, given how stretched valuations are, that we could end up triggering a correction of meaningful consequences,” she said.

Gopinath's warning came after US President Donald Trump stirred controversy at Davos by referring to Greenland as "our territory". While asserting the US wouldn't use force, Trump added a veiled threat: "You can say yes, and we will be very appreciative. Or you can say no, and we will remember."

She stressed that the global environment is increasingly precarious, with institutions like the IMF and the European Central Bank frequently flagging inflated asset prices, especially in US equities that trade at a significant premium over other markets. She warned that escalating geopolitical tensions, including renewed tariff battles, could spark a market decline similar to the sharp April 2 plunge in the S&P 500.

ALSO READ: Martin Wolf Hails India's Rise Amid Global Upheaval, Calls Trump Tariffs 'Crazy'

While India has managed to divert some exports despite steep US tariffs, such strategies have limited longevity. “You cannot keep doing that for a very long time,” she said, urging India to widen its network of trade agreements to protect against external shocks. 

She also highlighted the urgency of creating an investor‑friendly environment. If India fails to inspire confidence among global investors, she said, it will inevitably hold investment back. Environmental degradation, she argued, is one of the biggest risks. "Addressing pollution should be the top mission for India," she said, calling it a challenge far more consequential than tariffs.

“The impact of pollution on the Indian economy is far more consequential than any tariffs. It is not just the annual cost to India's GDP but also the loss of lives,” she noted, underscoring the economic and humanitarian toll of deteriorating air quality.

On the long‑pending EU‑India trade deal, Gopinath offered a positive outlook. “It would be a very strong signal of economic cooperation, of new alliances,” she said, adding that such partnerships would help India navigate an increasingly fragmented global marketplace.

ALSO READ: Mahindra Group CEO Anish Shah Recalls Trump Meet in Davos — "We Need More Like You"

Watch LIVE TV, Get Stock Market Updates, Top Business, IPO and Latest News on NDTV Profit.