The World Bank on Tuesday said higher tariffs on Indian goods exported to the U.S. will drag the South Asian growth rate in 2026, even as the current year remains shielded by government spending.

The World Bank said growth in South Asia is expected to slow sharply to 5.8 per cent in 2026 from its projection of 6.6 per cent for 2025. Its forecast for the region comprises India, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives.

“For 2026, the forecast has been downgraded, as some of these effects unwind and India continues to face higher-than-expected tariffs on goods exports to the United States,” the World Bank said in its report. 

The World Bank has raised its forecast for India’s growth in the current fiscal year ending March 2026 to 6.5 per cent from 6.3 per cent, while trimming its projection for the next fiscal year to 6.3 per cent from 6.5 per cent.

U.S. President Donald Trump imposed a 50 per cent tariff on most exports from India, among the highest of any U.S. trading partner. The move impacts about $50 billion of Indian exports to the U.S., mainly hurting labour-intensive sectors such as textiles, gems and jewellery and the shrimp industry.  

To offset the impact of tariffs, Indian Prime Minister Narendra Modi cut taxes on everything from shampoos to cars last month, in the biggest tax overhaul since 2017, even as India continues to spend aggressively on infrastructure projects.

Source: Reuters

- Agencies