The Reserve Bank of India (RBI) has slightly lowered its growth forecast for the current fiscal year, citing global uncertainties—including shifting trade dynamics triggered by U.S. President Donald Trump’s latest tariff hikes on Indian goods.
In its monetary policy announcement on Wednesday, the RBI kept the repo rate unchanged at 5.5% in a unanimous decision by its six-member Monetary Policy Committee, led by Governor Sanjay Malhotra. The central bank also maintained a neutral policy stance.
The move comes just as the United States begins imposing an additional 25% tariff on all Indian goods, with President Trump warning of further hikes due to India’s continued imports of Russian oil.
Growth Forecast Trimmed Amid Global Uncertainty
While Governor Malhotra didn’t directly reference the U.S. tariffs, he acknowledged that global trade conditions remain fragile and unpredictable.
“Prospects of external demand remain uncertain amidst ongoing tariff announcements and trade negotiations,” he said. He also pointed to persistent geopolitical tensions and financial market volatility as risks to India’s growth outlook.
As a result, the RBI lowered its GDP growth projection from 6.7% to 6.5% for the current fiscal year.
Malhotra added that some of these global risks, including the impact of trade policy shifts, have already been factored into the updated forecast.
Domestic Resilience Remains Strong
Despite global headwinds, the RBI governor was optimistic about India’s domestic economic momentum.
“Growth is robust and as per earlier projections, though below our aspirations,” he noted, highlighting India’s “inherent strength, robust fundamentals, and comfortable buffers.”
He stressed that India is well-positioned in a changing global order and reiterated the central bank’s commitment to fostering an environment that supports sustainable growth.
“Opportunities are there for the taking, and we are making all efforts to create enabling conditions through a multi-pronged yet cohesive approach to policy making,” Malhotra said.
Inflation Outlook Improves
In a positive development, the RBI revised its inflation forecast down to 3.1% from an earlier estimate of 3.7%. However, the central bank cautioned that inflation could trend higher later in the year.
Malhotra reaffirmed the RBI’s dual focus on supporting growth while ensuring price stability. “We will continue to be agile and proactive in providing a facilitative monetary policy based on incoming data and the evolution of the growth-inflation dynamics,” he said.
Policy Outlook
Looking ahead, the RBI emphasized the importance of broader, coordinated policy efforts beyond just monetary policy.
“As the Indian economy strives to attain its rightful place in the global economy, stronger policy frameworks across domains will be pivotal in its journey,” Malhotra concluded.
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