The Reserve Bank of India's Dr Nagesh Kumar in the minutes for Monitory Policy Committee Meeting from April 7 to 9 flagged serious concerns over the ongoing trade wars, saying India's growth prospects will be affected adversely.
"There is a serious risk of the world economy getting into a prolonged recession because of the trade wars and protectionism, which would also affect India’s growth prospects adversely. The WTO has already warned about the negative outlook for world trade. The global GDP growth projections for the current year are likely to be revised downwards in the aftermath of the reciprocal tariff and the trade war," said Dr Nagesh Kumar in the MPC minutes released on Wednesday.
The RBI's rate-setting panel had in its latest meeting slashed India's growth to 6.5% due to headwinds from global trade disruptions that continue to pose downward risks. Taking all these factors into consideration, real GDP growth for 2025-26 is now projected at 6.5 per cent, with Q1 at 6.5 per cent; Q2 at 6.7 per cent; Q3 at 6.6 per cent; and Q4 at 6.3 per cent.
Positive spins to trade war:
The RBI Governor Sanjay Malhotra in the minutes said "The Indian economy remains relatively less exposed and better placed to withstand such spillovers with its growth driven largely by domestic demand. Nevertheless, we are not immune to the aftershocks and ripple effects associated with global disturbances."
While talking about the impact on growth, Malhotra also said that there may also be some positive spin-off to the Indian economy from the likely softening of crude oil and commodity prices and relative tariff advantage.
"The high frequency indicators for the latest period indicate that domestic demand continues to be resilient, with urban consumption improving with an uptick in discretionary spending and rural consumption remaining robust on the back of favourable agricultural prospects," said Malhotra.
"Robust domestic demand will cushion the impact of external headwinds as in the past," said Malhotra.
Should India worry about Trump tariffs?
India is, however, confident of meeting its 6.3%-6.8% growth projection for FY26 despite global disruptions from new US tariffs, if oil prices stay below $70 per barrel, government officials had said. Many economists have however lowered their forecasts.
The World Bank cut its economic growth forecast for India on Wednesday, citing increased uncertainty in the global economy that will dim prospects for most South Asian nations. The World Bank lowered its forecast for India by 0.4 percentage points to 6.3% for the fiscal year that started on April 1, from its previous forecast in October.
The IMF lowered its forecast to 6.2% from the 6.5% it had forecast in January for the current fiscal year.
Goldman Sachs lowered its growth estimate to 6.1% from 6.3%. Citi forecast a 40 bps drag on growth directly and indirectly from Trump tariffs, while Mumbai-based QuantEco Research estimated a 30 bps hit.
Some others, including those at HSBC and UBS Securities, expect the fresh tariffs and related turmoil to shave 20-50 basis points off India's growth this fiscal.
They, however, have predicted lower impact if India can secure a favourable trade deal with the US for which negotiations are in progress.
The tariffs could also deliver a heavy blow to consumer demand in sectors such as gems and jewellery, although others like textiles may have an opportunity to benefit from higher US tariffs on competing nations.
"There is a serious risk of the world economy getting into a prolonged recession because of the trade wars and protectionism, which would also affect India’s growth prospects adversely. The WTO has already warned about the negative outlook for world trade. The global GDP growth projections for the current year are likely to be revised downwards in the aftermath of the reciprocal tariff and the trade war," said Dr Nagesh Kumar in the MPC minutes released on Wednesday.
The RBI's rate-setting panel had in its latest meeting slashed India's growth to 6.5% due to headwinds from global trade disruptions that continue to pose downward risks. Taking all these factors into consideration, real GDP growth for 2025-26 is now projected at 6.5 per cent, with Q1 at 6.5 per cent; Q2 at 6.7 per cent; Q3 at 6.6 per cent; and Q4 at 6.3 per cent.
Positive spins to trade war:
The RBI Governor Sanjay Malhotra in the minutes said "The Indian economy remains relatively less exposed and better placed to withstand such spillovers with its growth driven largely by domestic demand. Nevertheless, we are not immune to the aftershocks and ripple effects associated with global disturbances."
While talking about the impact on growth, Malhotra also said that there may also be some positive spin-off to the Indian economy from the likely softening of crude oil and commodity prices and relative tariff advantage.
"The high frequency indicators for the latest period indicate that domestic demand continues to be resilient, with urban consumption improving with an uptick in discretionary spending and rural consumption remaining robust on the back of favourable agricultural prospects," said Malhotra.
"Robust domestic demand will cushion the impact of external headwinds as in the past," said Malhotra.
Should India worry about Trump tariffs?
India is, however, confident of meeting its 6.3%-6.8% growth projection for FY26 despite global disruptions from new US tariffs, if oil prices stay below $70 per barrel, government officials had said. Many economists have however lowered their forecasts.
The World Bank cut its economic growth forecast for India on Wednesday, citing increased uncertainty in the global economy that will dim prospects for most South Asian nations. The World Bank lowered its forecast for India by 0.4 percentage points to 6.3% for the fiscal year that started on April 1, from its previous forecast in October.
The IMF lowered its forecast to 6.2% from the 6.5% it had forecast in January for the current fiscal year.
Goldman Sachs lowered its growth estimate to 6.1% from 6.3%. Citi forecast a 40 bps drag on growth directly and indirectly from Trump tariffs, while Mumbai-based QuantEco Research estimated a 30 bps hit.
Some others, including those at HSBC and UBS Securities, expect the fresh tariffs and related turmoil to shave 20-50 basis points off India's growth this fiscal.
They, however, have predicted lower impact if India can secure a favourable trade deal with the US for which negotiations are in progress.
The tariffs could also deliver a heavy blow to consumer demand in sectors such as gems and jewellery, although others like textiles may have an opportunity to benefit from higher US tariffs on competing nations.
You may also like
Rahul Gandhi cuts short US visit in wake of Pahalgam terror attack; to attend CWC meeting in Delhi
"UK stands with India in sorrow and solidarity": Former UK PM Rishi Sunak condemns terror attack in Pahalgam
Andhra CM Chandrababu Naidu pays last respect to Pahalgam terror attack victim
All 133 international students, including many Indians, who filed a lawsuit get their SEVIS records restored
Why won't JD Vance attend Pope Francis's funeral? Here's what he said
