Global headwinds pose downside risk to India’s growth: RBI MPC minutes

RBI Governor Sanjay Malhotra

India’s economic growth remains on a steady path, but global turbulence threatens to weigh down the country’s momentum, according to the Reserve Bank of India’s Monetary Policy Committee (MPC).

In the minutes of its April 2025 meeting, released on April 23, the RBI revised its GDP growth projection for 2025-26 slightly downward to 6.5 percent, citing heightened global trade tensions, softening external demand, and growing investment uncertainty.

RBI Executive Director Rajiv Ranjan noted that while the domestic economy continues to show resilience, it cannot remain entirely insulated from the evolving external environment.

“Global growth, that was already below its historical average of 3.7 per cent, is going to undergo downward revisions,” he said, adding that India’s growth, though steady, is “lower than our aspirations and needs policy impetus amidst a challenging global environment.”

The downgrade comes amid what the MPC describes as a “new restricted and fragmented global trade order,” triggered by recent retaliatory tariffs imposed by the United States and China.

“Faced with this uncertainty, monetary policy actions by central banks remain guarded,” said Ranjan, highlighting the cautious stance adopted by many advanced and emerging economies.

Deputy Governor M Rajeshwar Rao echoed similar concerns, saying the external situation demands decisive domestic support for growth.

“GDP growth could face a downward pressure. The recent waves of global uncertainty demand decisive policy support to growth,” he said.

Saugata Bhattacharya, another MPC member, in the minutes, warned that if trade tariff actions are not significantly diluted, “global trade and hence growth will slow down materially, likely spilling over into India via external channels.”

“India’s forte is its higher growth potential supported by strong macroeconomic fundamentals,” said Ranjan, “and accordingly, we need to continue to accord higher weight to growth in our policy setting.”