RBI raises red flag on Donald Trump¡¯s 26% tariff on Indian products; warns of export crash, muted economic growth
With Donald Trump¡¯s 26% tariff on Indian exports now in effect, RBI Governor Sanjay Malhotra warns of global trade shocks impacting growth. The central bank points to pressure on net exports, market volatility, and long-term inflation risks.
India¡¯s economy is now facing direct pressure from US trade policies, with a 26% tariff on Indian exports officially starting Wednesday. Reserve Bank of India Governor Sanjay Malhotra, while outlining the central bank¡¯s monetary policy, addressed the growing challenges that global trade tensions pose for India¡¯s export-driven sectors.
Rising tariffs, shrinking exports
Malhotra pointed out that global economic growth is being affected by trade disputes, and India is not immune to the fallout. He explained that the latest US move¡ªimposing a 26% duty on Indian products¡ªwould likely weaken India¡¯s export performance and dampen domestic growth.
The RBI Governor warned that India¡¯s merchandise exports are expected to decline due to ongoing global trade instability. At the same time, services exports may continue to perform steadily, but the broader picture remains uncertain.
He highlighted that these trade disruptions are already impacting many regions, and India¡¯s external trade position will face further stress as a result of the higher tariffs.
Uncertainty clouds outlook
According to Malhotra, the difficulty lies not just in the tariffs themselves, but in the unknowns surrounding their full impact. He referred to several "known unknowns"¡ªfactors that make it hard to forecast how India¡¯s trade flows will respond.
He added that a trade agreement with the United States is still under negotiation, and its outcome will play a key role in shaping the country¡¯s export path.
Despite these uncertainties, Malhotra expressed cautious confidence that India¡¯s industrial foundation and policy support could soften the blow. Programmes like Production Linked Incentives and the Make in India initiative, he said, could help keep domestic output stable.
Inflation and policy measures ahead
On inflation, Malhotra said the RBI¡¯s projections remain within the expected range, assuming the monsoon stays normal. However, he also noted that market instability worldwide could push inflation higher than anticipated.
The Governor confirmed that the RBI is monitoring the developments and will introduce further steps to keep the economy balanced if needed.
Stock markets react as tariff takes effect
The introduction of the US tariff coincided with a market dip in India. At around 9:31 am, the new duty officially took effect. By 10:30 am, the BSE Sensex had dropped more than 450 points to reach 73,823, while the Nifty50 fell to 22,400.
The central bank also announced a reduction in the repo rate by 25 basis points, bringing it down to 6%. This announcement came shortly after the market opened, around 10 am.
Justifying the tariff, US President Donald Trump had earlier claimed that India charges the US high import duties, while the US gives much easier access. Speaking at a White House event on April 2, he said, ¡°They charge us 52%, and we charge them almost nothing,¡± referring to India¡¯s trade practices.
As the global environment becomes more unpredictable, India now faces a critical moment in balancing export resilience, inflation control, and domestic production.
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Nancy Jaiswal is a journalist who started her career in reporting and has covered both hard and soft news. From serious city news developments to lighthearted lifestyle pieces, she has written on almost everything hapenning in India (except maybe alien invasions¡ªyet!). For her, writing isn¡¯t just work; it¡¯s a passion, an obsession, and sometimes the reason she forgets to reply to texts.
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