The governor of RBI, Sanjay Malhotra, in the latest monetary policy review statement, said that the uncertainties in the global market with respect to rising tariffs will impact India’s growth in the second quarter of the financial year 2025-2026.
The remarks are important in the backdrop of the 50 per cent tariffs imposed by the United States on India. Things took a wild turn between India and the US post the tariffs, and though there is negotiation for trade pacts, tension regarding India’s oil imports from Russia, and India’s red line when it comes to the dairy sector, has made headlines.
Addressing a conference after the policy meeting, he said that the GST rate cuts might bring some relief but will not be enough to compensate for the tariff losses. He informed that both sides are negotiating over reducing tariffs, but the RBI has made calculations taking the 50% tariff into account.
Stating that the external situation and tariffs will have a downside risk to India’s economic growth, the RBI governor emphasised that it will also impact the export sector. A positive outlook by the MPC was positive domestic demand despite the external shocks. It also states that the GDP will benefit from a surplus monsoon, monetary easing, low inflation, and the GST reforms. This being said, the MPC stance was clear that the growth in the coming quarters will be lower than expected. It highlighted an increase in growth for the current year, but a decrease in the coming years.
The repo rate has been kept the same at 5.5% noting that it is done due to policy support and the expectation of an increased domestic demand.
