‘No major impact on Indian economy’: RBI governor after Donald Trump threatens additional tariffs on India

Reserve Bank of India (RBI) Governor Sanjay Malhotra said that US President Donald Trump’s tariffs on India would not have a major impact on the economy, but conditions apply. 

“We don’t see a major impact of US tariff (on economy) unless you have retaliatory tariff,” Malhotra said in his press conference after the latest Monetary Policy Committee (MPC) meeting. 

Malhotra also highlighted the ongoing global trade tensions, particularly those involving tariff announcements by the United States. In his statement, Governor Malhotra emphasised the challenges posed by external factors.

He noted, “Prospects of external demand remain uncertain amidst ongoing tariff announcements and trade negotiations. The headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook.”

The RBI boss’ comments came after Trump on Tuesday said that he might ‘substantially’ hike tariffs on India in the next 24 hours. He accused India of ‘fuelling’ the Russia-Ukraine war by purchasing Russian oil. 

Trump told CNBC in an interview: “They have the highest tariff of anybody … We settled on 25%, but I think I’m going to raise that very substantially over the next 24 hours because they’re buying Russian oil. They’re fueling the war machine.”

Despite these uncertainties, the central bank decided to maintain its key lending rate at 5.5% during the latest MPC meet. Furthermore, the RBI has kept its GDP growth forecast for the 2025-26 fiscal year at 6.5%.

“Growth is robust and as per earlier projections though below our aspirations. The uncertainties of tariffs are still evolving. Monetary policy transmission is continuing,” stated the Governor.

Inflation has shown a decrease, notably due to volatile food prices. The Governor remarked, “Headline inflation is much lower than projected earlier, mainly due to volatile food prices, especially of vegetables. Core inflation, on the other hand, has remained steady around the 4% mark, as anticipated.”

Globally, challenges persist, with the Governor noting, “Globally, policymakers are faced with muted growth and slowing pace of inflation, with some advanced economies even witnessing an uptick in inflation.” He added that political uncertainties have lessened, but trade issues remain.

The next policy review is scheduled for September 29 to October 1, 2025.