India appears to have maintained solid growth says OPEC

The Organisation of the Petroleum Exporting Countries or OPEC stated in a latest monthly update that India appears to have maintained solid growth in 1Q25, although some annual slowdown is likely unfolding in 1H25. This is partly due to the dampening impact of US tariffs on Indian imports, following the introduction of a 10% global baseline tariff. However, on 9 April, the US paused its previously announced reciprocal tariffs for 90 days, providing temporary relief. Additionally, inflation fell in March and has now moved further below the midpoint of the central bank’s inflation expectation of 4%. So far, the effective tariff rate may be lower due to a variety of exceptions, including on pharmaceutical and energy imports, among others. Moreover, US imports from India total less than $90 billion, slightly more than 2% of India’s GDP. Thus, while India’s trade with the US is significant, it is at a relatively limited scale in relation to the size of its economy.

Furthermore, monetary easing is expected to play an important role in mitigating the tariff-related impact and supporting growth going forward. With inflation projected to remain below 4%, the Reserve Bank of India is likely to cut its key policy rate from 6% in April to around 5.25 to 5.5% by year-end. Based on the latest RBI meeting minutes from April, it seems that the central bank prioritised supporting economic growth amidst a benign inflation outlook, and will likely continue to do so. On the fiscal side, the government continues to strike a balance between supporting growth and pursuing fiscal consolidation. Economic growth estimate in 2025 is unchanged from the previous month, standing at 6.3%, and is expected to remain robust. By assuming that ongoing trade-related negotiations will lower the currently announced tariffs, limiting the trade impact for 2026, the Indian economy is expected to continue expanding, with policy continuity and inflation easing. Economic growth is forecast at an unchanged 6.5%.

Powered by Capital Market - Live News