High tariffs imposed by the United States could pose challenges for India, according to a Crisil Intelligence report. The report notes that both Indian goods exports and investment may face pressure due to the tariffs. However, domestic consumption, supported by soft inflation and prior interest rate cuts, is expected to underpin economic growth.
GDP Hits Five-Quarter High
India’s GDP grew 7.8% in Q1 FY 2025-26, marking a five-quarter high, up from 7.4% in the same quarter last year. However, nominal GDP growth slowed to 8.8% from 10.8% over the same period, reflecting moderation in price pressures.
CPI Inflation Likely to Decline
Crisil projects Consumer Price Index (CPI) inflation to drop to 3.5% in the current fiscal year from 4.6% last year. Healthy agricultural output is expected to keep food inflation under control, though the impact of excessive rainfall is still being assessed.
RBI May Cut Rates Again
Low crude oil prices and softening global commodity costs are expected to curb non-food inflation, giving room for monetary policy easing. The Reserve Bank of India (RBI) may implement another interest rate cut this fiscal year, followed by a pause. The central bank had already reduced the repo rate by 100 basis points between February and June 2025 and is now monitoring the full transmission of these cuts.
Overall, while external risks from US tariffs remain a concern, India’s domestic demand, favorable inflation trends, and accommodative monetary policy are expected to support continued economic growth, the Crisil report concludes.
