RBI More Concerned About Tariff Impact On Growth Than Inflation, Says Governor Malhotra

The Reserve Bank of India is more concerned about the potential impact of US-led tariffs on economic growth than on inflation, Governor Sanjay Malhotra said on Wednesday.

Speaking at the post-Monetary Policy press conference, Malhotra explained that the central bank’s decision to revise the GDP growth forecast for financial year 2026 to 6.5% from 6.7% was primarily driven by uncertainty surrounding tariffs. “More than inflation, we are concerned about the tariff impact on growth,” he said.

Global growth estimates have been revised downward due to escalating tariffs, the RBI governor said. While the US may face higher inflation, the impact will vary across countries. For India, a softer global demand environment and declining crude oil prices could help ease inflationary pressures, but the growth impact remains a greater concern.

The 20-basis point reduction in India’s growth forecast reflects the cautious outlook amid the evolving global trade scenario, Malhotra noted. “Crude prices have come down, and this may help in terms of inflation, but the larger worry is how tariffs may hurt growth,” he said.

During the MPC decision announcement, Malhotra had commented on broader macroeconomic developments, including a strengthening US dollar, falling bond yields, equity market corrections, and the sharp decline in oil prices. India has made steady progress on price stability and growth, but risks remain, he said.

At its bi-monthly meeting, the Monetary Policy Committee also lowered its inflation projection for fiscal 2026 to 4% from 4.2%, keeping it within the RBI’s target range of 2–6%.

To support economic activity, the RBI cut interest rates for the second consecutive time and shifted its monetary stance from 'neutral' to 'accommodative', indicating the possibility of further rate cuts.

The US tariffs, announced by President Donald Trump on April 2, include a 26% levy on Indian exports.