Informist Media – Growth Focus: See upside to growth if there's early resolution to US tariffs, says RBI Governor Malhotra

Growth Focus: See upside to growth if there’s early resolution to US tariffs, says RBI Governor Malhotra

NEW DELHI – Reserve Bank of India Governor Sanjay Malhotra expects an upside to India’s GDP growth forecast if there is an early resolution to the India-US trade deal negotiations, which could soften the current tariff blow from Washington. India currently faces the heat of US’ 25% reciprocal tariffs, with another 25% punitive tariff for having economic relationship with Russia.

“India is mostly domestic driven economy, so while we are impacted by the higher tariffs, it is not a matter of huge concern,” Malhotra said at an International Monetary Fund event Wednesday. “India’s GDP growth of 6.8% is much below our aspirational levels of growth for Viksit Bharat 2047 so it does impact but yes, there will be an upside if we are able to have an early resolution to the tariffs,” Malhotra said.

New Delhi is engaged in talks with Washington for a trade deal, with the two sides having so far held five rounds of negotiations. Currently, India’s team is visiting the US for a round of discussion. Malhotra said he had a brief meeting with the team over breakfast earlier in the day.

The central bank on Oct. 1 raised its GDP growth projection for 2025-26 (Apr-Mar) to 6.8% from 6.5% projected earlier, drawing comfort from the 7.8% GDP print for Apr-Jun, which was a surprise on the upside, Malhotra had mentioned in his policy statement.

The course of trade negotiations between India and the US has seen considerable ebb and flow in the past seven months, with the two sides hitting a stalemate in August over disagreements on the farm sector. The negotiations resumed in September. But with the US government shutdown, the future course of talks remains uncertain. The US tariffs have cast a shadow on over $50 billion of Indian exports from labour-intensive sectors like textiles, gems and jewellery, marine products, and furniture and bedding. In FY25, India had exported $86.51 billion worth of goods to the US and had a trade surplus of $40.82 billion with the country.

From a monetary policy perspective, the central bank has said that it is committed to supporting domestic growth, given the benign inflation scenario. Anchoring inflation, Malhotra said Wednesday, was possible due to coordinated monetary and fiscal measures. The government’s supply-side measures have helped in bringing down food inflation below the tolerance band, Malhotra said at the IMF event. Food inflation has troubled the central bank for far too long, and is expected to be benign going forward.

Speaking about emerging economies and the volatility in capital markets due to exogenous factors, the governor said that both the Indian rupee and the equities market are correcting from the outperformance that was seen in 2024 and the RBI continues to maintain its stance that markets should decide what the levels should be.