RBI Governor Tackles Trump Tariffs: Headwinds To Lower India’s FY26 GDP Growth

The imposition of a 26% tariff by the United States on Indian imports has the Indian central bank lowering its GDP growth estimate for 2025-26. RBI Governor Sanjay Malhotra, in his first monetary policy statement of FY26, highlighted the challenges posed by global trade uncertainties and policy frictions. In his statement, Malhotra emphasizes how uncertainty dampens growth by affecting investment and spending decisions, while higher tariffs negatively impact net exports. Despite these headwinds, India's GDP growth for 2025-26 is projected at 6.5%, slightly revised from earlier estimates of 6.7% due to global volatility. Merchandise exports face downward risks, but services exports remain resilient amidst the turmoil. On inflation, Malhotra notes a dual impact: currency pressures may lead to imported inflation, while a global slowdown could soften commodity prices, easing inflationary concerns. The governor also touches upon the broader economic risks stemming from trade disruptions and the potential policy measures India might adopt, including a Foreign Trade Agreement with the U.S., which could mitigate some adverse effects.