Impact of US Tariff Policies on Global Economy and India
The economic repercussions of US President Donald Trump's tariff policies are becoming evident across the globe. The uncertainty has prompted international organizations to revisit their growth projections.
Global Economic Projections
- International Monetary Fund (IMF): Reduced its forecast for global growth and trade. India's growth estimate has been cut by 30 basis points to 6.2%.
- World Bank: Lowered India's growth projection to 6.3% from an earlier assessment of 6.7%.
- Reserve Bank of India (RBI): Less pessimistic, reducing India's growth estimate by 20 basis points to 6.5%.
Economic Impact on India
- Exports: Indian exports, especially in IT, may face challenges as US companies delay projects and new deals. Some sectors like Tiruppur could benefit.
- Investment: Uncertainty may constrain new investments, especially as countries redirect exports.
- Financial Markets: Volatility could make overseas fundraising challenging, though commodity prices may stay subdued.
- Oil Prices: Brent crude oil is stable around $67 per barrel, benefiting government finances.
Monetary Policy and Investment
- Repo Rate Cuts: The RBI's monetary policy committee recently reduced the repo rate by 25 basis points to stimulate the economy. There's a suggestion for a more significant 50 basis point cut.
- World Bank's View: Notes that the benefits from monetary easing may be offset by global economic weakness and policy uncertainty.
Trade Agreements
Efforts are underway to finalize trade agreements with the US. US Treasury Secretary Scott Bessent has hinted that India might be the first to finalize a trade deal, potentially avoiding reciprocal tariffs and reducing uncertainties for global and domestic firms.