Reserve Bank of India governor on April 9 said the global economic outlook is changing very fast and the announcement of tariffs on major economies by US President Donald Trump has “exacerbated uncertainties”.
“The recent trade tariff related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation,” Malhotra said, noting that the global financial markets have responded with sharp fall in dollar index and equity sell-offs with significant softening in bond yields and crude oil prices.
He added that tariff uncertainty may lead to pressure on rupee and import inflation.
"Rising trade protectionism, currency war threats, and higher international crude oil prices are
also some of the factors that may exert downward pressure on the Indian rupee," he said.
The central bank on April 9 announced a 25-bps rate cut and a GDP growth projection of 6.5 percent, down from 6.7 percent estimated in the February meeting. The Malhotra-led monetary policy committee also projected an inflation of 4 percent, revised down from 4.2 percent.
The RBI chief predicted that sustained demand from rural regions and an anticipated revival in urban consumption are expected to support growth.
Moreover, he said that exports are likely to be weighed down by the “evolving global economic landscape” which appears to be “uncertain at the current juncture”, while services exports are expected to sustain the resilience.
“On the supply side, while agricultural prospects appear bright, industrial activity continues to recover, and services sector is expected to be resilient. Headwinds from global trade disruptions continue to pose downward risks,” said Malhotra during his quarterly announcement of rate policy.
The central bank governor also noted that growth is still on a “recovery path”, which has been “impeded” by a challenging global environment following an underwhelming performance in the first half of 2024-25.
“In such challenging global economic conditions, the benign inflation and moderate growth outlook demands that the MPC continues to support growth,” Malhotra explained the rationale behind the rate-setting panel’s decision to cut the repo rate and change its policy stance to ‘accommodative’.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
