The Reserve Bank of India (RBI) cut India's growth projection for FY25 by 20 basis points (0.2%) due to the impact of global trade uncertainties caused by U.S. President Donald Trump’s tariff war.
RBI Governor Sanjay Malhotra explained that the decision reflected concerns over the global trade and policy uncertainties affecting economic stability.
India’s low export volume to the U.S. and smaller trade surplus mean the country will face a lesser impact than most nations.
The tariffs could affect inflation in both positive and negative ways, but RBI is more concerned about their impact on growth.
Compared to countries like China, Germany, and the EU, India’s export dependency is much lower, giving it a competitive advantage in the U.S. trade scenario.
The Indian rupee would remain stable despite potential devaluation by China and that the RBI would intervene if needed to control volatility.
India’s reserves are strong, at nearly $700 billion, and its economic deficits are manageable, providing a cushion against external pressures.
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