The central financial institution warned that “exterior demand continues to face headwinds from international commerce uncertainties and US tariffs.”
It cautioned that “going ahead, the excessive US tariffs, until resolved, may cut back India's merchandise exports to the most important export vacation spot.”
The RBI added that the worldwide impression of tariffs may diverge sharply: “Within the US, tariffs are more likely to operate as a supply-side shock, step by step passing by way of to client costs and pushing inflation greater within the latter half of 2025. In distinction, greater tariffs are anticipated to dampen export demand and thereby exert downward strain on inflation in different areas.”
Towards this backdrop, the central financial institution's Financial Coverage Committee (MPC) voted unanimously to maintain the repo price unchanged at 5.5 per cent and to keep up a impartial stance, RBI Governor Sanjay Malhotra introduced.
The outlook, nonetheless, stays clouded by “exterior demand uncertainty pushed by tariffs; extended geopolitical tensions; and volatility in international monetary markets.” The RBI mentioned {that a} “extra constructive final result from commerce negotiations leading to diminished tariffs and a steady framework may bolster international progress.”On the home entrance, the report highlighted that reforms are anticipated to offer some cushion.
“The current structural reforms, together with the implementation of GST 2.0, are anticipated to spice up home demand and output, which can mitigate the opposed impression of US tariffs,” the RBI mentioned.
Market sentiment too has been rattled, with the central financial institution noting: “This momentum reversed in Q2 (as much as September 26), as international danger aversion intensified, compounded by U.S. tariffs.”
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