Nagesh Kumar, an external member of the Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC), told Moneycontrol in an interview that India may come out in a good shape and is likely to remain fastest growing economy despite ongoing trade war.
He also said that if India can make use of the relatively lower reciprocal tariffs (and through successful bilateral trade agreements negotiations), it may be possible for India to attract the value chains moving away from China and deepen its integration with the US economy.
The imposition of tariffs by US President Trump, earlier this month, had jolted the global economy and financial markets, including India, fanning potential slowdown fears, however, the uncertainty has eased after Trump paused the reciprocal tariffs for 90 days.
Kumar, in April monetary policy minutes, said that there is a serious risk of the world economy getting into a prolonged recession because of the trade wars and protectionism, which would also affect India’s growth prospects adversely. The WTO has already warned about the negative outlook for world trade.
During the interview he added that India need to monitor the global trends and take action as required, including through stimulating private consumption and investments through fiscal and monetary policy to sustain the growth momentum.
The global uncertainty arising from the ongoing trade war is also likely to adversely affect FDI inflows and private capex, he said.
The April 2025 IMF projection for India for 2025 is 6.2 percent, which is 30 basis points lower than the RBI forecast for 2025-26 of 6.5 percent.
The central bank has projected a GDP growth of 6.5 percent, revised lower from the February forecast.
On the inflation and rate action front, Kumar said that easing inflation and further data points which suggest that Consumer Price Index (CPI) inflation will remain within the target range of 4 percent, giving the central bank more room to cut more rates.
"The declining crude oil and other commodity prices with the subdued global demand, and normal monsoon predictions for 2025-26 suggest that CPI headline will remain within the target range of 4%. This provides headroom for adopting a more accommodative monetary policy," he said.
The RBI has already started the normalisation of monetary policy at the February 2025 MPC with a 25 bps cut in the repo rate and further 25 on April policy with change in stance to accomodative from neutral.
Kumar said India continues to enjoy a huge forex reserve along with robust macro-fundamentals.
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