Trump’s Tariffs Weigh Heavily on Growth Outlook, Not Inflation: RBI Governor Sanjay Malhotra
RBI Governor Sanjay Malhotra highlights US tariffs under President Trump as a bigger threat to India's growth than inflation. The RBI lowers GDP forecast and shifts to an accommodative stance to support the economy amid global trade tensions.
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Amid rising global uncertainty, Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday expressed deeper concern over the potential impact of US President Donald Trump’s newly imposed tariffs on India’s economic growth, rather than inflation.
Speaking at a press conference in Mumbai following the announcement of the first bi-monthly monetary policy for the fiscal year 2025–26, Malhotra said the uncertainty created by trade tensions—particularly Trump's 26% tariff on Indian goods—had prompted the RBI to revise India's GDP growth forecast downward.
> “The recent tariff-related developments have intensified global uncertainties and introduced fresh headwinds to both growth and inflation,” Malhotra stated.
In a direct response to these global trade shifts, the RBI lowered its real GDP growth projection for FY26 to 6.5%, down from 6.7%. The quarterly breakdown now stands at:
- Q1: 6.5%
- Q2: 6.7%
- Q3: 6.6%
- Q4: 6.3%
These forecasts were released on the same day Trump’s reciprocal tariffs came into effect, including the 26% duty on Indian imports—part of a broader global strategy to counter trade imbalances.
Despite these challenges, Malhotra struck a hopeful note, highlighting that India is better positioned than many economies to withstand the ripple effects of tariff hikes.
> “The impact on India is expected to be relatively muted—we retain a comparative advantage,” he affirmed.
Adding to the policy response, the RBI also cut the benchmark repo rate by 25 basis points, bringing it down to 6%. This marks the second consecutive rate cut, signalling the central bank’s pivot toward supporting economic growth amid rising uncertainty.
Additionally, the RBI shifted its monetary stance from ‘neutral’ to ‘accommodative’, paving the way for a more growth-oriented approach through softer interest rates. Home loan borrowers and businesses alike could find relief in this dovish move.
As the global economy faces a turbulent period with falling crude prices, softening bond yields, and volatile equity markets, the RBI’s cautious optimism and proactive policy adjustments aim to insulate India from deeper shocks—while staying alert to future developments in the global trade landscape.
