Governor Malhotra says Donald Trump's reciprocal tariffs on India ‘bigger worry than inflation’
The tariff-related uncertainties is also why the RBI lowered India's GDP growth forecast, Malhotra said during the post-Monetary Policy press conference.
Reserve Bank of India (RBI) governor Sanjay Malhotra on Wednesday said more than inflation, the central bank is concerned about the impact of US President Donald Trump's tariffs on India's growth.
Malhotra said during the post-Monetary Policy press conference that tariff-related uncertainties are also the reason the RBI lowered India's GDP growth forecast.
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The US reciprocal tariffs, which also include a 26% levy on Indian goods, came into effect on the same day.
As a result, the RBI cut its Real GDP forecast for the financial year 2025-26 to be 6.5%, from 6.7% earlier. The first quarter GDP forecast is now estimated to be at 6.5%, second quarter at 6.7%, the third quarter at 6.6%, and the fourth quarter at 6.3%.
"The recent trade tariff-related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation," he said in his original announcement address earlier.
He added, "Amidst this turbulence, the US dollar has weakened appreciably; bond yields have softened significantly; equity markets are correcting; and crude oil prices have fallen to their lowest in over three years.”
However, the more optimistic aspect here is that the impact of tariff hike will be much less on India than other nations. "We have comparative advantage," he said.
The RBI had also cut the benchmark repo rate by 25 basis points for the second consecutive time. The rate is now 6%.
It also shifted its stance from neutral to accommodative, meaning that it is now focusing on stimulating the economy through softer interest rates.
