Washington D.C.: Reserve Bank of India (RBI) Governor Sanjay Malhotra has stated that the recent tariffs imposed by the United States on India are "not a matter of huge concern" for India's economic growth. Speaking at the International Monetary Fund (IMF) and World Bank annual meetings in Washington D.C. on Wednesday, Malhotra emphasized India's strong domestic-driven economy as a buffer against the impact of these tariffs.
The Donald Trump administration has imposed tariffs of 50% on Indian goods, which includes a 25% tariff related to India's crude oil trade with Russia. Despite these measures, Malhotra remains confident, pointing to India's robust macroeconomic fundamentals and the significant depth of its markets. He noted that positive indicators, such as increasing capacity utilization, signal a healthy economic trajectory.
Malhotra acknowledged the global economic climate is fraught with "unprecedented uncertainties" stemming from various factors, including policy shifts. He recognized the challenges these uncertainties pose for emerging market economies. However, he highlighted India's resilience, noting the country's successful management of inflation, which has decreased significantly from its 2022 peak to 1.5%, the lowest in eight years. He also pointed out that India bounced back from the COVID-19 pandemic and the implications of the Russia-Ukraine war effectively.
The RBI Governor addressed the dynamics of the Indian rupee, mentioning that while the U.S. dollar has depreciated by 10%, the rupee's appreciation has been limited due to increased tariffs and capital outflows. He stressed the importance of maintaining stable rupee movements.
Furthermore, Malhotra highlighted India's strong growth projections, which have exceeded 8% over the past year. He also noted that the fiscal deficit is under control, projected at 4.4% of GDP for the Centre, and that India's total debt remains among the lowest globally. He credited the "good coordination between government and fiscal authorities" for these positive outcomes.
While downplaying the overall impact of the tariffs, Malhotra acknowledged that certain sectors, such as gems and jewelry, textiles, apparel, shrimps, and MSMEs, could face potential challenges. He mentioned that the Indian government has established a committee to assess the impact of the tariffs and implement supportive measures as needed.
Malhotra expressed optimism that ongoing trade negotiations between India and the U.S. would lead to more favorable outcomes. He noted that despite the increased tariffs, India's exports to the U.S. rose to $45.82 billion in the first half of the current financial year (April-September), a 13.3% increase compared to the same period last year. He also indicated that India is open to importing more crude oil and natural gas from the U.S., as well as sourcing renewable energy technologies, as part of a comprehensive trade package.
