Trump's higher tariff threat on India: What RBI governor Sanjay Malhotra said on GDP growth; 'really very difficult to...'
RBI governor Sanjay Malhotra on Wednesday indicated that it is difficult to predict the impact of the tariffs imposed by the Donald Trump administration on India. The RBI-led Monetary Policy Committee (MPC) has kept the repo rate unchanged at 5.5% in today's monetary policy review.
The central bank has also retained the GDP growth forecast at 6.5% for fiscal year 2025-26.
Asked about the impact of US tariffs on India's GDP growth, Sanjay Malhotra said, 'On growth, you are very well aware that we had already reduced our forecast, which was earlier, 6.7% to 6.5% so some of the global uncertainties have already been factored in the revised growth forecast.'
'However, there is still a lot of uncertainty, as was also mentioned in my statement and it's really very difficult to predict as to what the impact will be.
Going forward, as we have mentioned, we will maintain a very, very close vigil on the incoming data and take a call as of now, we do not have sufficient data to revise our GDP forecasts,' Malhotra said when asked about the Indian economy's outlook if the 25% tariff stays, or is even raised.
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Talking about the evolving global economic situation, the RBI governor said, 'We will continue to monitor our macroeconomic conditions on a policy to policy basis, and accordingly take a call.
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It's all very, very uncertain. We already did a 100 basis point rate cut. The other thing is that monetary policy transmission is still happening. We will continue to do whatever is required to facilitate good growth while, of course, maintaining price stability.
'
Asked about India-US trade deal talks, he said, "Of course, trade negotiations as we'll continue, we are hopeful that we will have, you know, an amicable solution."
RBI retains GDP growth forecast despite Trump Tariff threat
Earlier today, in his monetary policy statement, RBI governor said, 'Growth is robust and as per earlier projections though below our aspirations. The uncertainties of tariffs are still evolving. Monetary policy transmission is continuing. The impact of the 100 bps rate cut since February 2025 on the economy is still unfolding.'
'The supportive monetary, regulatory and fiscal policies including robust government capital expenditure should also boost demand.
With sustained growth in construction and trade segments, the services sector is expected to remain buoyant in the coming months. Prospects of external demand, however, remain uncertain amidst ongoing tariff announcements and trade negotiations,' he said.
'The headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook.
Taking all these factors into account, real GDP growth for 2025- 26 is projected at 6.5%, with Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6%, and Q4 at 6.3%. Real GDP growth for Q1:2026-27 is projected at 6.6%. The risks are evenly balanced,' he said.
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Donald Trump's '24 hour' warning
US President Donald Trump has issued a warning about increasing tariffs on India beyond the current 25%. In an interview on Tuesday, Trump indicated that within the next 24 hours, the US would likely implement a significant increase in tariffs on India, citing its Russian crude oil purchases and unwillingness to cease these imports.
The Trump administration's officials have alleged that India is contributing to the funding of Russia's Ukrainian conflict through its continued crude oil imports.
"India has not been a good trading partner, because they do a lot of business with us, but we don't do business with them. So we settled on 25 percent but I think I'm going to raise that very substantially over the next 24 hours, because they're buying Russian oil," he said in an interview with CNBC.
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