India’s growth fundamentals ‘very strong’! RBI governor Sanjay Malhotra dismisses worries on Trump tariffs; ‘not a matter of huge concern’

India’s economic story is strong, and with a largely domestically driven economy, the impact of US tariffs is not a matter of huge concern, believes RBI governor Sanjay Malhotra.

The Donald Trump administration has imposed 50% tariffs on India, 25% of which are for the latter’s crude oil trade with Russia.During the IMF annual meetings, the central bank governor noted that India's economy remains primarily domestically oriented, and whilst tariffs have an impact, they do not present substantial concerns.Malhotra affirmed on Wednesday that Indian markets possess significant depth, whilst highlighting the country's robust macroeconomic fundamentals.He said that positive indicators point towards "capacity utilisation is increasing."Regarding global uncertainties, Malhotra said, "We are living in times of unprecedented uncertainties on account of various reasons, including policy uncertainties." He highlighted the challenges these conditions pose for emerging market growth, adding, "It is a risk that all EM economies must take into account."Addressing inflation and global disruptions, the RBI governor observed that despite elevated levels, inflation has shown considerable reduction from 2022 peaks.

Regarding price levels and GDP growth, the RBI chief discussed India's resilience against international disruptions, stating, "India bounced back from Covid, the implications of Russia-Ukraine war; we have managed our inflation very well—from 8% to now 1.5%—the lowest in 8 years." He acknowledged that food prices dominate India's CPI basket, creating specific challenges for the fiscal committee.The governor emphasised India's robust economic performance, noting growth forecasts exceeding 8 percent throughout the previous year.

The fiscal deficit remains controllable at 4.4 percent of GDP for the Centre, whilst total debt stays amongst the world's lowest. He attributed these achievements to effective collaboration between the government and fiscal committee."On an average in the last four years, we have got an eight plus percent growth rate. The first quarter was 7.8%. So I would say, a coordinated effort with the fiscal authorities identifying pressure points, both on the demand side and supply side, and this coordinated action really helped us."Addressing currency dynamics, he indicated that despite the dollar's 10 percent decline, the Indian rupee showed limited appreciation compared to other currencies, attributing this to increased tariffs and capital outflows. He stressed the importance of maintaining stable rupee movements.The governor observed that worldwide economic growth remains weak, with nations adopting increasingly protectionist stances. Various elements, including export prospects and tariff structures, will determine currency and domestic economic outcomes. He noted that both households and enterprises currently exhibit hesitancy in spending and investment decisions, indicating wariness during uncertain times.