World Bank: The World Bank on Tuesday issued a warning that high tariffs imposed by the United States on Indian exports could decelerate South Asia's economic growth in 2026, while despite this, the current year's situation remains under control due to solid government spending. According to the report, South Asia's growth rate is projected to fall from an estimated 6. 6% in 2025 to 5. 8% in 2026. The World Bank's assessment covers countries including India, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives.
US Tariffs Key Factor for 2026 Slowdown
The World Bank explicitly stated that the downward revision of the 2026 growth forecast is primarily due to India facing higher-than-expected tariffs from the United States on its exported goods. The report notes that while some effects will gradually diminish, increased US duties will exert pressure on India's growth, thereby impacting overall regional development.
India's Latest Growth Projections
For the current fiscal year (ending March 2026), the World Bank has raised India's growth forecast from 6. 3% to 6. 5%, reflecting strong government expenditure and solid domestic demand. However, the projection for the next fiscal year (2026-27) has been lowered from 6. 5% to 6. 3%. This adjustment underscores the potential long-term implications of the US tariffs.
US Imposes 50% Tariff on Indian Exports
US President Donald Trump has imposed a 50% tariff on most exported products from India, marking the highest duty ever levied on any American trade partner. This measure affects approximately $50 billion worth of Indian exports, particularly impacting labor-intensive sectors such as textiles, gems and jewelry, and the shrimp industry, while
Focus on Tax Cuts and Investment
To mitigate the impact of these tariffs, Indian Prime Minister Narendra Modi last month announced significant tax cuts on a range of products, from shampoos to cars, in what is being described as the largest tax overhaul since 2017. Concurrently, India continues to rapidly invest in infrastructure projects, bolstering domestic demand. Experts suggest that India must focus on increasing domestic investment and diversifying its export markets to counter these external pressures effectively.
