Raghuram Rajan warns US risks economic blow if political interference tightens flow of foreign students

Former Reserve Bank of India Governor Raghuram Rajan has warned of potential risks to the US economy if the Trump administration implements policies to restrict the international student flow into US universities. Rajan's comments came amid the Trump administration's latest order to US embassies worldwide to halt interviews for student visas, as the government considers stricter screening rules, including vetting of their social media profiles.

The order follows the Trump administration's recent disputes with prominent universities, including Harvard University and Columbia University. Amid these disagreements, the Trump administration is also seeking to withdraw an estimated $100 million in funding from Harvard University.

“The Sergey Brins of the world came as students and did wonders for the US economy...to some extent, the problem is the universities haven’t made the case that they are so central to US growth, but also central to the distribution of that growth,” he told Bloomberg.

Rajan, a professor of finance at the University of Chicago Booth School of Business, said that such a move by the Trump administration could hamper job growth, as large US companies employ thousands, many of whom are international students.

Rajan also spoke on Trump’s tariff policy, stating that it is unlikely to yield a significant number of manufacturing jobs. "A substantial increase in manufacturing jobs (in the US) is unlikely. The jobs that do return will mostly be automated, and the new roles created will largely be for technicians operating the machines, not for workers doing manual tasks on the line," Rajan said during a separate interaction with CNBC TV18 on the sidelines of a UBS Conference.

He also said that it is unlikely that US tariffs will return to previous levels, and that a base level of around 10% is likely to remain. He further stated that if India can roll out the red carpet, with a predictable tax and policy regime, allow production for the domestic market, and assure long-term stability, it could lead to a significant increase in foreign direct investment.