RBI Guv says Trump tariffs will have negative impact on net exports

​RBI Governor Malhotra warned that increased US tariffs could hinder India's exports and domestic growth, emphasising the central bank's commitment to monitoring inflation risks

RBI Governor Sanjay Malhotra said that the new financial year has commenced amid global economic uncertainty, with the central bank closely monitoring inflation risks stemming from these developments. His remarks follow the recent decision by the Donald Trump administration to impose reciprocal tariffs on Indian exports.  

In an address to announce the decisions made by the Monetary Policy Committee (MPC) on Wednesday, the Governor said, "First and foremost, uncertainty in itself dampens growth by affecting investment and spending decisions both of businesses and households. Second, the dent on global growth due to trade frictions will also impede domestic growth. Third, higher tariffs shall have a negative impact on net exports. "

 

 

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"The impact of relative tariffs, our relative tariffs vis some of the other countries are quite low. Then there is the unknown of the elasticities of our export and import demand and the policy measures adopted by us. India is very vigorously and proactively engaging with the US administration on the foreign trade agreement...," he further said.

 

While he acknowledged that it is currently challenging to gauge the precise impact of international events on India’s economic performance, he emphasised the RBI’s confidence in managing domestic growth effectively.

 

He also highlighted positive trends in the agriculture sector and a revival in manufacturing. "Services sector continues to show resilience. Urban consumption is picking up with uptick in discretionary spending," he said, noting that the financial health of banks and corporates remains "healthy".

 

RBI cuts repo rate by 25 bps to 6%

 

The Reserve Bank of India’s Monetary Policy Committee (MPC) has unanimously opted to cut the repo rate by 25 basis points, bringing it down to 6 per cent, RBI Governor Malhotra announced on Wednesday. This is the second rate reduction in 2025, following a previous cut in February when the rate was brought down from 6.5 per cent to 6.25 per cent — the first such move in nearly five years.

 

Alongside the repo rate adjustment, the standing deposit facility (SDF) rate has been revised to 5.75 per cent from 6 per cent, while the marginal standing facility (MSF) rate now stands at 6.25 per cent, down from 6.5 per cent.

 

The MPC has also adopted an "accommodative" policy stance. Retail inflation for February 2025 was recorded at 3.61 per cent, staying comfortably below the RBI’s 4 per cent target.