6 days Ago By Moneycontrol
The uncertainties facing the global economy due to US President Trump's reciprocal tariffs will have a negative impact on India's exports as well as domestic growth, Reserve Bank of India governor Sanjay Malhotra said during his MPC briefing on April 9. “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.
Under these circumstances, central banks are navigating cautiously, with signs of policy divergence across jurisdictions, reflecting their own domestic priorities,” the RBI governor said in his statement. Malhotra highlighted multiple areas of concerns - investment and consumption, domestic growth, exports - as well as the impact of tariffs on domestic inflation and growth. “First and foremost, uncertainty in itself dampens growth by affecting investment and spending decisions of businesses and households.
Second, the dent on global growth due to trade frictions will impede domestic growth. Third, higher tariffs shall have a negative impact on net exports,” 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,” the governor added. On inflation, he pointed out that the risks posed by higher tariffs will be two sided. “On the upside, uncertainties may lead to possible currency pressures and imported inflation.
On the downside, slowdown in global growth could entail further softening in commodity and crude oil prices, putting downward pressure on inflation. Overall, while global trade and policy uncertainties shall impede growth, its impact on domestic inflation, while requiring us to be vigilant, is not expected to be of high concern,” said the Governor..
