RBI governor admits Trump tariffs’ impact on Indian economy:Know why the top bank revised upwards India’s GDP forecasts for FY26 to 6.8% despite global trade headwinds

While, delivering the Monetary Policy Statement of October 2025 meeting of the Monetary Policy Committee (MPC), the Reserve Bank of India (RBI), governor, Sanjay Malhotra, said on Wednesday, October 01, 2025, that, he expected the tariffs to decelerate India’s economic growth. Still, the committee revised upward the Gross Domestic Product (GDP) forecasts for Financial Year 2025-26 (FY26) to 6.8% from 6.5%, made earlier. Lets decode why the RBI governor said so! Despite the negative impact of ‘Trump Tariffs’, the RBI revised upward the GDP forecast for FY26 because of following factors: Favourable monsoon: Malhotra said that the above normal rainfall in the current monsoon season augers well for the future growth prospects of the economy. The 4-month summer (southwest) monsoon season ended on Tuesday with 8% more than normal rainfall. Good progress of Kharif sowing: In India, the Kharif season generally starts in June and ends in October. The RBI governor said “good progress of kharif sowing has further brightened prospects of agriculture and rural demand.” This factor too had paved the way for the rate-setting panel to up India’s growth prospects for FY26. Domestic drivers: The apex bank head also said that the MPC has also noted that growth outlook remains resilient supported by domestic drivers. Lower inflation: Due to the recent GST cut, the RBI has revised downwards the country’s inflation trajectory for four straight quarters starting right from the past quarter of June 2025 to the first quarter of the next fiscal. The RBI governor said that the already resilient growth outlook is likely to get further support from lower inflation paving the way for upward revision of GDP growth. Following table depicts RBI’s revised projections for inflation in India: Positive impact of GST reforms: As mentioned above, the GST cut would already play its part in downward revision of inflation forecast. Additionally, according to Malhotra, the GST reforms would also play a part in mitigating the impact of Trump tariffs on the GDP growth. RBI’s GDP projections in October’s MPC meet: