Concerned about tariff impact on growth more than inflation: RBI Governor
New Delhi, Apr 9, 2025
During the post-Monetary Policy press conference, RBI Governor Sanjay Malhotra said the central bank lowered the growth forecast primarily because of the tariff-related uncertainties
Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday said that more than inflation, the central bank is concerned about the impact of US tariffs on growth.
During the post-Monetary Policy press conference, Malhotra said the RBI lowered the growth forecast primarily because of the tariff-related uncertainties. "More than inflation, we are concerned about tariff impact on growth," he said.
Earlier today, the RBI's bi-monthly Monetary Policy Committee (MPC) decided to lower its gross domestic product (GDP) growth forecast for 2025-26 (FY26) to 6.5 per cent from 6.7 per cent. The inflation projection was also lowered to 4 per cent from 4.2 per cent, keeping it within the target range of 2-6 per cent.
The MPC also cut interest rates for a second consecutive time and signalled more easing to come as it sought to bolster the economy. Governor Malhotra hinted at another reduction in key policy rate by changing the central bank's monetary stance to 'accomodative' from 'neutral,' which may further lower EMIs for consumers.
"The recent trade tariff related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation," he said while announcing the decisions made by the MPC. "Amidst this turbulence, the US dollar has weakened appreciably; bond yields have softened significantly; equity markets are correcting; and crude oil prices have fallen to their lowest in over three years." Under these circumstances, central banks are navigating cautiously, with signs of policy divergence across jurisdictions, reflecting their own domestic priorities.
Impact of US tariffs much less on India: RBI Governor
Speaking about Trump's tariffs, Governor Malhotra said the impact of tariff hike is much less on India than other nations. "We have comparative advantage," said the Governor.
On Wednesday, the reciprocal tariffs announced by US President Donald Trump on April 2, including a 26 per cent levy on Indian exports to the US, came into effect. Trump has repeatedly accused India of running large trade surpluses with the US.
While announcing the decisions made by the MPC, the Governor said, "First and foremost, uncertainty in itself dampens growth by affecting investment and spending decisions both of businesses and households. Second, the dent on global growth due to trade frictions will also impede domestic growth. Third, higher tariffs shall have a negative impact on net exports."
(With inputs from agencies)
[The Business Standard]
