RBI warns of global growth risks but sees India resilient amid trade tensions

The Reserve Bank of India (RBI), in its latest monthly bulletin for April, has said the escalation of trade and tariff tensions and the resultant financial market volatility have raised concerns regarding the weakening of global growth in the near term. However, says the central bank, India’s strength to withstand these headwinds stems from its robust growth fostered by a strong macroeconomic framework and moderating inflation, with strong domestic engines of growth. 

The agricultural sector in India, specifically, is poised to sustain its momentum, supported by bumper kharif and rabi harvest and higher summer sowing amidst comfortable reservoir position, adds the RBI bulletin.

It says that although the dampening global economic outlook could impact India’s economic growth through weaker external demand, the domestic growth engines, viz., consumption and investment, are relatively less susceptible to external headwinds.

The RBI has said in the near-term, "global growth outlook remains downcast", as uncertainty surrounding tariffs and the individual policy responses of different countries could result in lower investment spending, subdued consumer confidence, and a slowdown in global trade.

US President Donald Trump plans to increase the 10% tariffs on Indian exports to 26% if no trade deal is struck by the end of the 90-day pause Trump put in place earlier this month.

The central bank says the long-term effects of these developments on the course of the global economy remain "highly uncertain" as there is still no clarity regarding the scope, timing and intensity of tariffs.

The RBI believes the global financial conditions are likely to remain "volatile" and emerging market economies (EMEs) are "vulnerable" to feedback loops and spillovers, which may lead to the reignition of global inflation.

But the decline in global commodity prices is a good sign. This could "ease pressure on inflation" in commodity importing, says the RBI.

As a warning sign, the central bank says risks emanating from the rise in temperature above normal levels and the likelihood of heatwaves in the current summer season (April - June), however, need to be monitored. "Industrial and services activity continues to remain resilient."

Going forward, the RBI says that India is poised to benefit from supply chain realignments, diversified FDI sources, and engagement with global investors seeking resilience and scale, given its already established trade linkages. "India’s consistent strength in services exports and remittance inflows continues to provide a vital buffer for the current account. Calibrated policy support can help India turn global volatility into an opportunity and strengthen its position in the emerging world economic landscape."

Notably, the global multilateral lending agency IMF (International Monetary Fund), in its latest update to the World Economic Outlook (WEO) 2025, has slashed its FY26 growth forecast for India by 30 basis points to 6.2% from 6.5% amid trade tensions and global uncertainty. "For India, the growth outlook is relatively more stable at 6.2 per cent in 2025 (2025–26), supported by private consumption, particularly in rural areas, but this rate is 0.3 percentage point lower than that in the January 2025 WEO Update on account of higher levels of trade tensions and global uncertainty," the IMF said.