World Bank cuts South Asia outlook on Trump tariffs to India
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The projection for 2026 is the region’s lowest in 25 years, excluding periods of global recession or economic downturns, the lender said..
PHOTO: AFP
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- World Bank cut South Asia's 2026 growth forecast to 5.8%, the lowest in 25 years excluding recessions, due to US tariffs.
- India's GDP is expected to grow 6.5% this fiscal year, but the next fiscal year forecast is trimmed to 6.3%.
- US tariffs on Indian exports are penalising New Delhi, impacting labour-intensive industries and increasing economic risks.
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The World Bank cut its forecast for South Asia’s economic growth by nearly 1 percentage point, as punishing US tariffs on India – the region’s largest economy – weigh on the outlook.
In its Oct 7 report, the Washington-based institution projected South Asia’s growth to ease to 5.8 per cent in 2026, down from 6.6 per cent in 2025, a sharper slowdown than previously anticipated.
The projection for 2026 is the region’s lowest in 25 years, excluding periods of global recession or economic downturns, the lender said.
“South Asia has enormous economic potential and is still the fastest-growing region in the world. But countries need to proactively address risks to growth,” said Mr Johannes Zutt, World Bank vice-president for South Asia, in a statement.
The outlook for the region comes as growth in India, the Maldives and Nepal is set to come under pressure in 2026, driven by weak export prospects following US President Donald Trump’s trade measures, rising foreign exchange strains, and social unrest, respectively.
While India’s gross domestic product is expected to grow 6.5 per cent in the financial year ending March – lower than the Reserve Bank of India’s 6.8 per cent projection – the forecast for the next fiscal year has been trimmed by 0.2 percentage point to 6.3 per cent.
Mr Trump imposed 50 per cent tariffs on Indian exports to the US to penalise New Delhi for its trade barriers and purchases of Russian oil. The tariffs cover more than three-quarters of goods shipped to the US – India’s largest market – hitting labour-intensive industries such as textiles and jewellery the hardest.
The World Bank cautioned that South Asia’s outlook faces mounting risks from a volatile global economy, artificial intelligence-driven labour disruptions and social unrest.
“Each of these shocks could interact with elevated debt levels and weaknesses in the financial sector to create financing pressures,” it added. BLOOMBERG
