The Reserve Bank of India (RBI), in its latest bulletin, has highlighted that ongoing trade tensions between India and the United States remain a risk for the economy. At the same time, it expects inflation to stay lower than earlier thought, at least in the near term.
India’s exports to the US have been hit after President Donald Trump imposed an extra 25% tariff on Indian goods from August 27, in response to India’s oil imports from Russia. This comes on top of an existing 25% reciprocal tariff, raising the total to 50%. According to the RBI, this steep duty poses downside risks to India’s trade performance.
On the positive side, good rainfall and suitable temperatures this year are expected to benefit the kharif crop. This could push rural incomes higher. Rising rural wages, in turn, may help boost demand in the second half of the financial year.
The bulletin further said that with financial conditions staying comfortable, earlier interest rate cuts still working through the economy, government spending, and stronger consumer sentiment, overall demand should hold steady.
On inflation, the central bank gave an optimistic view. Food price pressures remain low, and favourable base effects are likely to push headline inflation below the 4% target in the July-September quarter. However, inflation could edge up again in the last quarter of the fiscal. Still, on average, inflation for the year is expected to remain well below the 4% target, giving some relief to consumers and policymakers.
The RBI said it will continue to keep a close watch on economic data, especially inflation trends and growth patterns, before taking further policy steps. The overall tone of the bulletin suggests that while India faces external risks from global trade tensions, domestic conditions such as agriculture, rural demand, and supportive policies may help balance the outlook.
In short, the RBI sees short-term inflation easing and domestic growth support, but warns that US tariffs could weigh on India’s exports.
