RBI Governor says trade tariff related measures cloud economic outlook across regions

Sanjay Malhotra said that trade tariff related measures have clouded the economic outlook across regions, posing risk of new headwinds for global growth and inflation

Mumbai: Reserve Bank Governor Sanjay Malhotra on Wednesday said that trade tariff related measures have clouded the economic outlook across regions, posing risk of new headwinds for global growth and inflation.

On the ramifications of a global tariff war on India, he said it would have a negative impact on the country’s exports. “Merchandise exports will be weighed down by global uncertainties, while services exports are expected to remain resilient. Headwinds from global trade disruptions continue to pose downward risks,” he said while unveiling the first bi-monthly monetary policy statement for the current financial year.

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RBI has also lowered the growth projection to 6.5 per cent from the earlier estimate of 6.7 per cent for the current financial year due to global uncertainties.

“While the risks are evenly balanced around these baseline projections, uncertainties remain high in the wake of the recent spike in global volatility. It may be noted that the growth projection for the current year has been marked down by 20 basis points relative to our earlier assessment of 6.7 per cent in the February policy,” he said.

This downward revision essentially reflects the impact of global trade and policy uncertainties, he said. “The recent trade tariff-related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation. Amidst this turbulence, the US dollar has weakened appreciably; bond yields have softened significantly; equity markets are correcting; and crude oil prices have fallen to their lowest in over three years,” he said.

Under these circumstances, central banks are navigating cautiously, with signs of policy divergence across jurisdictions, reflecting their own domestic priorities, he said.

“There are, however, several known unknowns – the impact of relative tariffs, the elasticities of our export and import demand, and the policy measures adopted by the government, including the proposed Foreign Trade Agreement with the USA, to name a few. These make the quantification of the adverse impact difficult,” he said.