Mumbai: Reserve Bank of India (RBI) Governor Sanjay Malhotra on Monday expressed confidence that ongoing trade negotiations between India and the United States would reach a favorable outcome despite recent tariff hikes.
“We are hopeful that negotiations on tariffs will play out and there will be minimal impact,” Malhotra said at an event in Mumbai. His remarks came as the sixth round of India-US Bilateral Trade Agreement (BTA) talks, originally scheduled for August 25, was postponed.
Highlighting the strength of India’s external position, the Governor noted that the country’s foreign exchange reserves stood at $695 billion, sufficient to cover 11 months of imports. “We have very robust foreign exchange reserves of $695 billion, sufficient to cover 11 months of merchandise exports. Generations of freedom fighters gave us a 'Swatantra Bharat', a free India, and now we must work for a 'Samriddh Bharat', a prosperous India,” he added.
Malhotra said the overall tariff impact was expected to be limited, though sectors such as textiles, apparel, and gems and jewelry could face some pressure. Pharmaceuticals, smartphones and steel, however, remain relatively insulated due to exemptions, existing tariff structures and strong domestic demand.
From August 7, US President Donald Trump imposed a 25 per cent tariff on imports from India, with an additional 25 per cent levy set to take effect on August 27, bringing the total to 50 per cent. Washington said the move was in response to India’s continued purchase of Russian crude oil, which it claimed undermined efforts to pressure Moscow over the Ukraine conflict. New Delhi, however, has defended its stance, arguing that Russian oil imports helped stabilize global energy markets.
Analysts suggest that while labor-intensive sectors may feel the pinch, India’s broader economic growth is unlikely to be significantly affected due to robust domestic demand.