Indian Economy Faces Potential Downgrade Amid Tariff Concerns
Economists are currently holding their India GDP forecasts steady, but a cloud of uncertainty looms. A persistent tariff regime could lead them to trim projections by about 20 basis points. If the full 25% tariffs are implemented, forecasts are likely to slip to the 6–6.1% range.
However, there’s still a glimmer of hope that India will negotiate a tariff rollback, which is why most analysts are holding off on revisions for now. Another factor contributing to their cautious stance is the uncertainty surrounding the final form of the tariff penalties.
Inflation Expectations See a “Dramatic” Drop
While GDP forecasts hang in the balance, a more immediate shift is happening with inflation expectations. A significant drop in food prices and global slowdown concerns have caused a dramatic downward revision in full-year inflation forecasts.
The economist consensus has plummeted to 2.9%, a substantial drop from 3.4% just a month ago. This puts it 80 basis points below the Reserve Bank’s estimate of 3.7%.
This combination of lower food inflation and potential disinflation from weak export demand and falling commodity prices has fueled expectations of another interest rate cut later in the year.