RBI Governor Sanjay Malhotra comments on trade tensions, says India's growth remains stable despite external pressure

At a time when many global markets are seeing trade pressure, India’s central bank believes the country will continue to grow without major disruption. RBI Governor Sanjay Malhotra, during the IMF–World Bank annual meetings held in Washington on 14 October 2025, addressed concerns on the economic impact of US tariff hikes.

His message was clear, the growth outlook is softer and below expectations, but India’s domestic market strength offers a solid cushion.

This statement comes amid increasing worries about the impact of US tariffs on India’s economic growth. Let’s look at what this means, how it connects to older policy moves, and what the numbers say.

India Faces Pressure But Keeps Growth Steady

The latest trade numbers paint a mixed picture. According to the Ministry of Commerce and Industry’s September 2025 data, India’s trade deficit widened sharply. The deficit touched ₹2.68 lakh crore ($32.16 billion), the highest in over a year. This was mostly due to a sharp fall in exports to the United States and a rise in imports, including gold.

Read More – India’s Economic Growth Weaker Than Expected, Says RBI Governor Sanjay Malhotra

One worrying trend was that exports to the US fell to ₹44,390 crore ($5.43 billion) in September 2025. That’s a drop from ₹56,070 crore ($6.87 billion) in August.

Still, the RBI view on India’s growth despite US tariffs remains firm. The central bank believes that internal demand, infrastructure investment, and stable monetary policy can support the economy through this external shock.

Category	Value (USD Billion)	Monthly Change
Total Exports	34.12	-2.10%
Exports to United States	5.43	-21.00%
Total Imports	66.28	+4.2%
Trade Deficit	32.16	+15.4%

These numbers raise short-term concerns. But the RBI’s approach suggests confidence in the medium-term recovery.

What Do Trade Tariffs Mean For India’s Economy?

Trade tariffs are taxes on imports or exports, often used by countries to protect local industries. In theory, higher tariffs reduce imports or make foreign goods more expensive. For an exporting country like India, it can mean reduced demand for goods, especially in sectors heavily dependent on US buyers.

Reports from Moody’s Analytics (October 2025) predict that India’s GDP may slow by 0.3 percentage points in FY2025-26 due to new tariff pressures from the US. Key sectors at risk include textiles, processed foods, marine exports, and jewellery, all of which send large volumes to the United States.

Meanwhile, brokerage firm Nomura reported that 30–40% of India’s total export volume to the US is directly affected by tariff hikes. This includes many MSMEs, which often lack the buffer to deal with cost hikes or demand drops.

Sector	Share in US Exports	Tariff Impact
Textiles	14.60%	High
Gems & Jewellery	11.20%	Moderate
Processed Foods	5.80%	High
Pharmaceuticals	7.90%	Low

The pressure is high on labor-intensive industries. These also face rising freight and production costs.

Domestic Demand Keeps India Moving

Despite weak global demand, India’s domestic consumption is holding up. The Ministry of Statistics and Programme Implementation (MoSPI) reported a retail inflation rate of 1.54% in September 2025, the lowest in eight years. This drop gives the RBI room to manage monetary policy more flexibly.

The fall in inflation also helps the rupee hold value, which is important for import-heavy sectors like fuel and electronics. While RBI has not changed interest rates, the central bank said in its October 2025 MPC meeting minutes that it is ready to respond if needed.

Month	CPI (%)
July	2.98
August	2.42
September	1.54

This softening in prices has kept public spending and borrowing steady. Inflation control also gives RBI the ability to manage exchange rate stability without aggressive measures.

How This Connects To Past Policy Events

The RBI’s cautious stand has roots in history. In 2017, when inflation stayed low but growth was weak, the central bank paused rate cuts to study demand. During the 2020 COVID crisis, however, it acted fast and reduced rates by 115 basis points to support credit and protect the economy.

The 2025 approach sits between these two examples. Instead of acting early, the RBI now prefers to watch liquidity trends and private credit movement before making a decision. The government supports this cautious stance, pointing out that steady infrastructure spending is already helping growth.

As LoansJagat reported in “RBI Increases IPO Financing & Loan Against Securities Limits — Key Takeaways for Investors”, the central bank’s current steps show a balanced approach between growth and financial discipline.

Year	Governor	Growth Estimate	CPI (%)	Policy Action
2018	Urjit Patel	6.80%	4.6	Rate Hold
2025	Sanjay Malhotra	6.8% (projected)	1.54	Wait-and-watch

The reaction now seems measured, but risks remain if exports continue to fall for longer.

This Follows Our Earlier Reporting On MSME Struggles

In a previous report, India MSMEs and Export Lending Tightness, we covered how small businesses were facing trouble accessing credit due to low export demand. With these new tariffs, the problem may deepen.

Many of these MSMEs rely on the US for orders. Any drop in those numbers makes them vulnerable to delayed payments, cancelled contracts, and unpaid dues.

The new trade data and tariff measures tie directly into those older concerns. Policymakers may need to connect trade and credit policy going forward.

What Could Come Next From The Government?

So far, there has been no major response from the Ministry of Finance on this tariff-related drop. However, measures like duty waivers, tax credits, and sectoral relief could be explored if trends continue.

Also Read – Is India Prepared for Economic Recession: Spiked Gold Price Give Hints

Trade talks may also be restarted to seek fairer treatment for Indian exports. India could also negotiate better market access in other regions like Southeast Asia and the Middle East to reduce reliance on the US market.

With inflation under control, there is room for new fiscal support without raising concerns about the deficit.

Conclusion

The impact of US tariffs on India’s growth is still small, but the pressure is already visible. Export sectors are slowing, and MSMEs are feeling the strain. The RBI is cautious but remains calm for now. The next few quarters will show whether India’s economy is as strong as expected under these trade pressures.

The RBI Governor’s statement on US tariffs gives some short-term comfort. But if export pressure continues, stronger policy action may be needed later.

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