{"id":27063,"date":"2025-04-05T16:37:15","date_gmt":"2025-04-05T11:37:15","guid":{"rendered":"https:\/\/bigbreakingwire.in\/?p=27063"},"modified":"2025-04-05T17:17:19","modified_gmt":"2025-04-05T11:47:19","slug":"rbi-rate-cut-forecast-after-us-tariff-impact","status":"publish","type":"post","link":"https:\/\/bigbreakingwire.in\/rbi-rate-cut-forecast-after-us-tariff-impact\/","title":{"rendered":"RBI May Cut Interest Rates Further After U.S. Tariffs Hit Indian Exports"},"content":{"rendered":"
<\/div>\n

Global Trade Tensions Add Pressure on India’s Economic Growth<\/strong>

The Indian economy is facing fresh challenges after the United States imposed a 27% reciprocal tariff on Indian exports. Leading global financial institutions like Citi and Goldman Sachs now expect the Reserve Bank of India (RBI) to implement additional interest rate cuts to support growth.

These higher tariffs are expected to weigh on India’s exports and slow down economic momentum, prompting a possible monetary policy response from the RBI.

Citi Expects More Rate Cuts Amid Trade Tensions<\/strong>

In February, the Reserve Bank of India’s (RBI) monetary policy committee lowered the repo rate by 25 basis points, bringing it down to 6.25%. This was the first rate cut in almost five years. According to a recent forecast by Citibank, the RBI is likely to reduce the rate again in its upcoming policy meeting scheduled from April 7 to 9.<\/p>\n\n\n\n

Citi now anticipates three more rate cuts of 25 basis points (bps) each, up from its earlier forecast of two. This would bring the total expected easing in the current cycle to 100 bps.

The bank warned that the new U.S. tariffs have raised the weighted average tariff on Indian goods exported to the U.S. to about 25%, though sectors like pharmaceuticals and petroleum have been largely exempt.

Citi estimates that if these tariffs remain in place, India\u2019s GDP could take a 50-bps hit, with overall growth slowing by about 40 bps. However, ongoing trade negotiations between the two countries may help soften the blow.

Goldman Sachs Also Sees 100 bps Rate Cuts<\/strong>

Similarly, Goldman Sachs also expects 100 bps of total rate cuts, projecting 25-bps cuts in both Q2 and Q3 of 2025. The firm believes that the tariffs could cause a 30-bps drag on GDP in 2025, with another 20-bps impact likely from declining services exports due to weaker U.S. economic activity.

Because of these factors, Goldman Sachs has revised its real GDP growth forecast for India:

2025: Down by 30 bps to 6.1%<\/em><\/strong>

Fiscal 2026: Down by 20 bps<\/em><\/strong>

No Fiscal Stimulus Expected, Focus Stays on Fiscal Discipline<\/strong>

Both Citi and Goldman Sachs agree that the Indian government is unlikely to announce any major fiscal stimulus to counter these economic pressures. The government’s focus remains on fiscal consolidation, meaning it aims to keep the budget deficit under control.

Rupee May Weaken Further in Coming Months<\/strong>

The RBI is allowing more flexibility in exchange rate movements, and Citi expects the Indian rupee to fall to around 87 per U.S. dollar over the next 9 to 12 months. This depreciation could make Indian exports more competitive, but it also signals pressure on the currency due to external shocks.

Impact on Indian Stock Market Likely Limited<\/strong>

Despite the tariff concerns, Citi believes that the overall earnings impact on Indian stock indices may be limited. However, specific sectors that depend heavily on exports to the U.S. could come under pressure. These include:

Auto ancillaries<\/em><\/strong>

Chemicals<\/em><\/strong>

Select industrial companies<\/em><\/strong>

Goldman Sachs added that further downward revisions to growth forecasts are possible, depending on how the tariff negotiations evolve.

Hope Lies in Ongoing Trade Talks<\/strong>

There is still hope that ongoing bilateral trade talks between India and the U.S. could ease the tension. Citi noted that a deal could be signed in the second half of 2025. India has also increased its energy imports from the U.S., which could support trade balance discussions.

Goldman Sachs also sees a possibility of partial rollback of the tariffs as negotiations progress.

Conclusion<\/strong>

The 27% U.S. tariff on Indian exports has introduced a new layer of uncertainty for India\u2019s economic outlook. Leading global banks now forecast more rate cuts from the RBI, with 100 bps easing expected in total. While the broader equity market may remain stable, export-heavy sectors are at risk.

As the situation evolves, all eyes will be on the RBI\u2019s monetary policy, the rupee\u2019s movement, and the India-U.S. trade talks, which could define the course of India\u2019s economic journey in 2025 and beyond.<\/p>\n\n\n\n

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