Amid global trade tensions triggered by U.S. President Donald Trump’s tariff policies, Reserve Bank of India (RBI) Governor Sanjay Malhotra said that the impact of tariffs on Indian growth will be moderate. Although he acknowledged that the central bank had slightly reduced India’s growth projection in its latest monetary policy review by 20 basis points to 6.5%.
India in talks with 75 nations to tackle tariff fallout: RBI Governor
In an interview with the Times of India, he said that India is actively engaging with the United States and around 75 other countries to mitigate the impact.
U.S. President Donald Trump has imposed reciprocal tariffs on several countries, including India, in April 2025 to restructure global trade rules in favor of U.S. economic interests.
“Regarding global trade dynamics, India is engaged in talks with the U.S., and about 75 other countries are also in talks. I am hopeful that the impact of trade tariffs on our growth will be moderate,” the RBI Governor said.
Tariff to have opposing impacts on inflation: Malhotra
Addressing inflation concerns in a conversation with TOI, the Governor highlighted the dual impact of global tariffs. “On inflation, the tariff situation has opposing impacts: increasing prices due to imported inflation and softening prices due to slower global demand. The latter has a higher impact, leading to overall lower inflation,” he explained.
The Governor stressed the importance of enhancing India’s integration into the global value chain. “We need to diversify our trade relationships while simultaneously integrating more into the global value chain. This requires improving our efficiency and productivity,” he said.
He also underscored the importance of boosting internal growth engines. “It is also an opportune moment to focus on domestic growth drivers. The Union Budget’s focus on MSMEs, exports, agriculture, and investment is encouraging. The Budget also highlighted reforms, both at the central and state levels—financial and non-financial—as the fuel for growth,” he noted.
RBI governor signals rate cut possibility and firm fiscal path
While speaking about the upcoming Monetary Policy Committee (MPC) meeting in June, the Governor hinted at a potential shift in the interest rate trajectory.
“In the last Monetary Policy Committee (MPC) meeting, the stance was changed to accommodative. Going forward, this signifies either a status quo or a rate cut. The pace of any future cuts will be determined by the MPC,” he said.
The RBI Governor also expressed strong confidence in the government’s ability to meet its fiscal deficit targets. Malhotra told TOI, “Last year, it projected a deficit of 4.9% (of GDP) but reduced it to 4.7%. A glide path was set to reduce the fiscal deficit to 4.5% by FY26, and they are projecting 4.4% for this year. Given this track record, while there may be minor slippages on some heads, they will be made good on others. Overall, I am confident they will be able to meet the targets.”