Tariff tantrums have economists betting RBI biting rate-cut bullet again
The Reserve Bank-led monetary policy committee begins its bimonthly meeting on Monday and the policy decisions will be announced on Wednesday. The RBI has already cut the policy repo rate by a 100 bps since February with the last meeting delivering an unconventional 50 bps to 5.5%.
On July 30, US president Donald Trump unexpectedly announced a 25% flat tariffs on Indian goods along with an unspecified additional penalty on India's energy and military purchases from Russia. The announcement came as a shocker to New Delhi as five rounds of trade talks have been completed and the sixth round is slated for August 25 in the Capital. What was more shocking was that the new tariffs are much more than anticipated and leave Indian goods at a great disadvantage to many of its market rivals.
While economists at British brokerage Barclays see the tariff impact to shave 30 bps off GDP this fiscal—RBI has pegged it at 6.5% this fiscal, foreign agencies like the IMF and the Asian Development Bank have pegged it marginally lower at 6.4% and 6.5% respectively, domestic rating agency Icra and Japanese brokerage Nomura have pegged it at 20 bps bringing down growth to 6% this year.
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