RBI Chief Flags Risks of Growth and Inflation Uncertainty in Face of U.S. Tariffs

Unknown Apr 02, 2026 850 Views

The Governor of the Reserve Bank of India (RBI) expressed concerns regarding the economic effect of tariffs imposed by the U.S., underlining their ability to disturb growth and leave a trail of inflationary uncertainty behind in India. Addressing a policy briefing, the Governor pointed out the do...

Effect of U.S. Tariffs on Growth: The RBI Chief said U.S. tariffs on other trade partners would have a negative impact on India's economic growth, especially in export-oriented industries such as textiles, IT services, and engineering goods.

"We are concerned more about the growth impact of tariffs, as they can slow down exports and investment activity," the Governor added.

Inflationary Uncertainty: The Governor said tariffs would result in inflation going both ways:
Upward Pressure: Higher import costs resulting from tariffs may increase the cost of goods, particularly those dependent on international supply chains.
Downward Pressure: Slowing global demand resulting from trade tensions may lower commodity prices, thus alleviating inflation at home.
Policy Response:The RBI continues to focus on watching these trends closely while keeping a dovish stance to facilitate growth. Pre-emptive trade deals and export market diversification are viewed as essential steps to counter tariff risks.

Economic Context:

India's inflation is still within the RBI's target range of 4% (+/-2%), leaving scope for policy maneuverability.
Global trade disruptions remain a challenge for emerging economies such as India, highlighting the importance of strategic policymaking.

Leadership Insights:

The RBI Chief said: "Tariffs are a double-edged sword for India, affecting both growth and inflation. We are cautious and prepared to act firmly as circumstances change."

Conclusion:

The RBI’s balanced approach reflects its focus on navigating external risks while ensuring domestic economic stability.

Source: Economic Times; April 9, 2025.

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