MPC Members Express Caution on Tariff Impact Amid India’s Growth Outlook Concerns

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) expressed caution regarding the potential impact of rising global tariffs on India’s economic growth, even as it revised the growth forecast for FY26. According to minutes from the committee’s April 9 meeting, concerns over global trade tensions and their ripple effects shaped a consensus for a more supportive monetary policy stance.


MPC Members Express Caution on Tariff Impact Amid India’s Growth Outlook Concerns


The six-member panel voted unanimously for a 25 basis point cut in the repo rate and shifted its policy stance to "accommodative," aiming to cushion the economy from external shocks. Alongside this, the RBI revised its growth forecast for FY26 downward from 6.7% to 6.5%, aligning more closely with recent global projections — the International Monetary Fund (IMF) pegged it at 6.2%, while the World Bank set it at 6.3%.


Global Uncertainty and Domestic Resilience

RBI Governor Sanjay Malhotra acknowledged the heightened downside risks due to an uncertain global environment but struck a relatively optimistic tone on India’s ability to weather the storm.

"India remains relatively less exposed and better-placed to absorb external shocks, with growth largely driven by domestic demand," Malhotra noted. He also pointed to potential advantages from softer crude oil and commodity prices, and relative tariff advantages compared to more export-dependent economies.


Diverging Views Within the MPC

Deputy Governor Rajeshwar Rao emphasized caution, suggesting that trade disruptions and volatility in global financial markets could exert downward pressure on domestic growth. “While inflation appears under control, the economy may still face headwinds. Given the fragile global context, policy support for growth is crucial,” he said.

External member Nagesh Kumar advocated for stronger monetary support, suggesting a bolder 50 basis point rate cut. However, he supported a phased approach in light of persistent uncertainty. He stressed the importance of reviving private consumption and investment to maintain growth momentum.

Ram Singh, another external member, echoed concerns about global trade instability and emphasized a balanced approach that safeguards inflation control while promoting growth.

Saugata Bhattacharya added that external pressures could adversely affect India’s trade balance, capital flows, and remittances if global tariffs remain elevated. “Close monitoring of trends in India’s trade, along with domestic household behavior on consumption and savings, will be essential,” he said.

RBI executive director Rajiv Ranjan highlighted that although India is primarily domestic-demand driven, investment uncertainty and weaker external contributions could weigh on overall growth.


Domestic Demand as a Buffer

Despite the caution, the RBI’s latest State of the Economy report suggests that India may be less vulnerable to global trade tensions than many peers. With domestic consumption and investment being the key drivers, the central bank believes the economy retains resilience — although vigilance remains crucial.


Conclusion

As global tariff tensions continue to escalate, India’s policymakers are treading a fine line — balancing support for growth while preparing for external shocks. With the MPC leaning toward an accommodative stance and acknowledging the complex global backdrop, the focus remains on domestic demand as the primary engine of stability and growth.