RBI MPC meeting GDP forecast: RBI cuts India’s growth forecast amid Trump tariff tensions
ET quoted reports from several analysts and brokers that the MPC meeting was announced on the backdrop of Donald Trump, a 26% tariff on India, which could reduce GDP growth by 20-50 basis points by 20-50 basis points.
At the last central bank policy meeting, it was also the first meeting of New Reserve Bank of India Governor Sanjay Malhotra, where MPC fixed India’s GDP growth rate at about 6.7%.
The Reserve Bank of India (RBI) now expects economic growth to be 6.5%, 6.7%, 6.6% and 6.3% in the first quarter, 2nd, 3rd and 4th quarters of fiscal 2026, respectively, while the previous growth forecasts are 6.7%, 7%, 6.5% and 6.5%.
The economy is expected to slow to a four-year low of 6.5% in the fiscal year ended March 31, as high inflation, strict liquidity and stricter RBI regulations undermine urban demand, thus slowing growth in personal loans and credit cards.
The team led by Sanjay Malhotra lowered interest rates by 25 basis points to 6% on Wednesday. ET’s poll of economists expects the buyback rate to drop to 6%. Malhotra announced a Reuters poll of economists hopes to reduce the meeting by 25 basis points. “Today’s change in position means there will be no shock in the future, and MPC only considers two options – status quo or tax cuts,” Malhotra said.
Should India worry about Trump’s tariffs?
However, despite global losses from the new U.S. tariffs, India is confident to meet its 6.3%-6.8% growth forecast if oil prices fall below $70 a barrel. However, many economists have lowered their forecasts.
Goldman Sachs lowered its growth estimate to 6.1%, down from 6.3%. Citi directly and indirectly predicts 40 basis points of growth from Trump’s tariffs, while Mumbai-based Quenteco Research estimates 30 basis points to take a hit.
Some others, including those of HSBC and UBS Securities, expect new tariffs and related turmoil to lower the current fiscal growth by 20-50 basis points.
But if India can negotiate a favorable trade agreement with the United States, they already predict a lower impact.
Tariffs may also have a major blow to consumer demand in areas such as gemstones and jewelry, although others like textiles may have the opportunity to benefit from higher U.S. tariffs on competing countries.
Can India achieve its expected growth?
Trump’s reciprocal tariffs on India could threaten the Reserve Bank of India’s economic growth of 6.5% in 2025-26, with the government’s economic survey forecasts of 6.3%-6.8%.
An official who does not want to be identified told ET that the government also insists that its budget estimates are 10.1% nominal economic expansion.
Apart from the impact of tariffs, India may be optimistic about a strong rabies harvest and a revival of industrial activity, which could help economic growth. Household consumption is expected to remain stable and supported by middle-class tax scams in this budget.
The economic survey, released in January ahead of the alliance budget announcement, predicts slow growth this fiscal year to reduce global risks. The survey, prepared by the Finance Minister’s chief economic adviser, predicts GDP growth in fiscal 2026 is 6.3%-6.8%, with growth aiming to sag from 8.2% last year to a four-year low this year.
India’s economy grew by 6.2% from October to December, slowing to 5.4% in the second quarter, its weakest growth in nearly two years.
