Rising U.S. tariffs on Indian exports expected to slow South Asia’s growth next year despite strong 2025 performance.
The World Bank has warned that higher U.S. tariffs on Indian goods will weigh on growth in South Asia in 2026, even as the region remains supported this year by strong government spending. South Asia, comprising India, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives, is projected to grow at 5.8% in 2026, down from 6.6% in 2025.
India’s growth forecast for the current fiscal year ending March 2026 has been upgraded to 6.5% from 6.3%, but the projection for the following fiscal year has been trimmed to 6.3%. The slowdown reflects the impact of 50% U.S. tariffs on about $50 billion of Indian exports, primarily affecting labour-intensive sectors including textiles, gems and jewellery, and shrimp.
To mitigate the tariff impact, Prime Minister Narendra Modi recently implemented a major tax overhaul, reducing levies on items ranging from shampoos to cars, while maintaining aggressive infrastructure spending to sustain domestic demand and shield the economy from external shocks.
Source: Reuters
