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Journalism of Courage
RESERVE BANK OF India Governor Sanjay Malhotra on Monday said the central bank is ready to step in with policy measures to support economic growth and sectors hit by the proposed 50 per cent US tariffs if they start to weigh on India’s economic growth. The tariffs take effect on Wednesday.
“Whatever support is required from us for the growth of the economy and including those of the sectors which are impacted more, if it so happens, we would not be found wanting in our job,” Malhotra said at the FICCI-IBA annual banking conclave.
He said the RBI has ensured ample liquidity in the banking system and will take all necessary steps to support economic growth, especially in sectors that may be more severely impacted. According to RBI data, loans to industries — including micro, small, medium, and large enterprises — rose by 5.49 per cent year-on-year to Rs 39.32 lakh crore, marking the weakest growth since March 2022.
The government has also indicated that it is considering fiscal support measures for exporters as labour intensive textile and footwear sectors are expected to be hardest hit. It has held discussions with representatives and export promotion councils of some of these key sectors.
Malhotra also urged the industry to invest boldly and champion the entrepreneurial spirit that defines the country. “When balance sheets of banks and corporates are at their best, they should come together and drive the animal spirits to create an investment cycle which is so important at this juncture,” he said.
His remark comes at a time when private capital expenditure has remained sluggish for the last many quarters. The corporate loan book of domestic lenders slowed down in the first quarter of FY26, as companies put off investment decisions.
According to the Governor, 45 per cent of export items are outside the tax net and on the remaining 55 per cent there will be some potential impact. Some sectors like gems and jewellery, textiles, apparel, leather goods and MSMEs could face significant pressure.
Malhotra said the higher tariff announced by US President Donald Trump on all goods imported from India is likely to have a ‘minimal’ impact. On August 7, Trump announced plans to impose additional 25 per cent tariffs on India for buying Russian oil and weapons but gave a 21-day window to negotiate an agreement. This was on top of the 25 per cent tariff announced late July.
“There is an additional 25 per cent tariff (on India by the US), making it (total tariff to) 50 per cent. It is yet to kick in. We are hopeful that the trade negotiations (between India and the US) will play out, and the impact will be minimal,” Malhotra said.
Economists have said that a higher 50 per cent tariff on imports from India could impact the country’s real GDP growth by around 0.6 percentage point.
The governor said to minimise the impact of higher tariffs, the government has taken a series of reforms. The RBI, on its part, has reduced the repo rate by 100 basis points (bps), and has provided ample liquidity to the banking sector to support the growth of the economy, including to the sectors which are impacted the most.
India stands at a critical juncture as it navigates the choppy global economic environment characterised by heightened trade uncertainty and persisting geopolitical tensions. “We need to push the frontiers of growth. We all must step up our efforts to address the emerging challenges and capitalise on the opportunities ahead,” Malhotra said.
The governor further said the regulator is examining measures to expand bank credit towards productive sectors and reduce cost of intermediation. It would partner with the regulated entities to improve the efficiency and effectiveness of financial intermediation so as to ensure that the due benefits reach the people.
