US 50% Tariffs Not a Threat to India, Says RBI Governor
RBI Governor Downplays US Tariffs, Highlights India’s Economic Resilience Amid Global Uncertainty at IMF-World Bank Meetings
Mumbai: The Reserve Bank of India (RBI) governor Sanjay Malhotra downplayed concerns over US tariffs imposed by the Donald Trump-led US administration stating that India is largely a domestic-driven economy and could comfortably weather the trade pressure. “India is mostly a domestically driven economy, so while we are impacted, it's not a matter of huge concern,” Malhotra said, speaking on the sidelines of the International Monetary Fund (IMF) and World Bank Fall meetings at the IMF headquarters in Washington DC.
"We are living in times of unprecedented uncertainties on account of various reasons-including policy uncertainties. This has been challenging for the growth of the emerging market economy. It is a risk that all emerging marketing economies must take into account,” the RBI Governor said. He said that the country has recorded phenomenal growth with over 8 per cent projections in the past year amid unprecedented global uncertainties.
“India bounced back from Covid and the implications of the Russia-Ukraine war. We have managed our inflation very well, reducing it from 8 per cent to 1.5 per cent, which is the lowest in 8 years, and the strength of inflation has been elevated even as it has come down from the highs of 2022. Oil prices have also subdued.”
He said that country’s fiscal deficit is now at a manageable level and is projected to be 4.4 per cent of GDP for the Centre. The total debt is amongst the lowest in the world. “There will be an upside if we are able to have an early resolution,” Malhotra said who met the Indian team negotiating the trade deal with US counterparts, too.
The 2025 Annual Meetings of the World Bank Group (WBG) and the International Monetary Fund (IMF) began on Monday, October 13 and will run until October 18 at the IMF and World Bank Group headquarters, in Washington, DC.
The IMF warned that the global economy is showing signs of strain from sweeping US tariffs and protectionism, despite holding up better than expected so far. Meanwhile, Union Finance Minister Nirmala Sitharaman abstained from attending the annual World Bank and International Monetary Fund meetings in Washington, as India and the United States remain in talks over trade tariffs. Instead, the Indian delegation will be led by secretary of the department of Economic Affairs Anuradha Thakur. The team also included RBI governor. Trump has imposed a 50 per cent tariff on Indian goods including a 25 per cent penalty linked to India’s purchases of Russian oil. A PTI report claimed that India has indicated its readiness to step up energy imports from America.
On the rupee, which has been under pressure amid Trump's tariff measures, Malhotra reiterated that the RBI does not target any specific price level. “We believe in the markets to decide what the level should be," he said. “Our effort really is to ensure there is an orderly movement of the rupee both sides, and that any abnormal volatility is curbed.”
The RBI's frequent interventions have kept the rupee from breaching its all-time low of 88.80, last touched on September 30.
Malhotra also urged other central banks to use and promote Central Bank Digital Currencies (CBDCs) instead of stablecoins to facilitate international payments. “Unless other countries also adopt CBDC, we are not going to see the benefits of CBDC insofar as cross-border payments are concerned. So, I would urge all those present from central banks and other jurisdictions that we need to promote the CBDC, because this has huge advantages over stablecoins.”
