The World Bank has cautioned that US higher tariffs on Indian exports are likely to slow South Asia’s economic momentum in 2026, despite the region maintaining steady growth in 2025 driven by strong government expenditure.
In its latest report released Tuesday, the global lender projected South Asia’s growth to ease to 5.8% in 2026, down from 6.6% expected in 2025. The forecast covers India, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives.
The World Bank said in its report, “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.”
While India’s growth outlook for the current fiscal year ending March 2026 has been revised upward to 6.5% from 6.3%, the World Bank trimmed its forecast for the following year to 6.3%, citing the tariff impact.
The slowdown follows U.S. President Donald Trump’s decision to impose a 50% tariff on most Indian exports- one of the steepest rates applied to any U.S. trade partner.
The move affects roughly $50 billion worth of goods, dealing a blow to labour-intensive industries including textiles, gems and jewellery, and seafood.
To cushion the blow, Prime Minister Narendra Modi slashed taxes across a range of consumer and industrial goods last month – from personal care products to automobiles- in what has been described as the most sweeping tax reform since 2017.
India also continues to push ahead with large-scale infrastructure investments to sustain domestic demand.
