'Forecast downgraded': US tariffs on India to slow down South Asian economic growth; here's what World Bank says
Rising tariffs on Indian exports to the United States could drag down economic growth across South Asia in 2026, even as strong government spending shields the region this year, the World Bank warned on Tuesday.
It said that growth in the region, which includes India, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives, to drop sharply to 5.8% in 2026, down from 6.6% in 2025.
“For 2026, the forecast has been downgraded, as some of these effects unwind and India continues to face higher-than-expected tariffs on goods exports to the United States,” the World Bank said, as cited by Reuters.
The bank raised India’s growth forecast for the current fiscal year ending March 2026 to 6.5% from 6.3%, while the projection for the next fiscal year has been lowered to 6.3% from 6.5%.
The slowdown comes after US President Donald Trump’s decision to add a 25% levy on Indian imports, on top of the existing 25% tariff.
This raised the total tariff on most Indian exports to 50%, affecting around $50 billion worth of goods. Labour-intensive industries such as textiles, gems and jewellery, and shrimp are expected to face the greatest impact, as per a Reuters report.
Meanwhile, Prime Minister Narendra Modi rolled out sweeping tax cuts, known as GST 2.0, to give the economy a boost. Effective from September 22, the cuts cover a wide range of goods, from cars to shampoos, in the biggest overhaul since 2017, while the government continues heavy spending on infrastructure to support growth.
It said that growth in the region, which includes India, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives, to drop sharply to 5.8% in 2026, down from 6.6% in 2025.
“For 2026, the forecast has been downgraded, as some of these effects unwind and India continues to face higher-than-expected tariffs on goods exports to the United States,” the World Bank said, as cited by Reuters.
The bank raised India’s growth forecast for the current fiscal year ending March 2026 to 6.5% from 6.3%, while the projection for the next fiscal year has been lowered to 6.3% from 6.5%.
The slowdown comes after US President Donald Trump’s decision to add a 25% levy on Indian imports, on top of the existing 25% tariff.
This raised the total tariff on most Indian exports to 50%, affecting around $50 billion worth of goods. Labour-intensive industries such as textiles, gems and jewellery, and shrimp are expected to face the greatest impact, as per a Reuters report.
Meanwhile, Prime Minister Narendra Modi rolled out sweeping tax cuts, known as GST 2.0, to give the economy a boost. Effective from September 22, the cuts cover a wide range of goods, from cars to shampoos, in the biggest overhaul since 2017, while the government continues heavy spending on infrastructure to support growth.
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