UBS Says, "Despite recent external headwinds, macro risks remain manageable and the structural growth story is intact in India. We continue to believe India – while not immune to the higher tariffs – is less at risk than Asia's more open economies." (Photo Courtesy: Express Photo by Narendra Vaskar)
The RBI has revised its growth estimates on global headwinds and now UBS has downgraded India’s FY26 GDP estimates to 6% from 6.3%. It is factoring in a 25 bps negative drag from tariff hikes. They expect a total 125 bps rate cut going forward as part of policy initiatives to support domestic growth and demand in India.
According to UBS, reciprocal tariff is a significant headwind for global growth and India is not immune to it. UBS estimates that the larger-than-expected tariffs announced by the US – if sustained – would considerably weigh on global growth,” triggering a 7.5 ppt contraction in global trade volumes.” UBS highlighted that, “Despite recent external headwinds, macro risks remain manageable and the structural growth story is intact in India. We continue to believe India – while not immune to the higher tariffs – is less at risk than Asia’s more open economies.”
According to Tanvee Gupta Jain, Chief India Economist at UBS Securities, While cyclical rural demand recovers on good crop prospects and urban demand stabilises on softening inflation and rate cuts, “there could be a further delay in private corporate capex recovery due to weak corporate sentiment and the risk of China offloading excess capacity in the manufacturing sector.”
UBS also expects “India’s goods exports could take a meaningful hit due to weaker global growth. Our base-case forecast assumes that India could offer more tariff cuts on US imports and increase purchases of US goods, including energy and defence equipment at the expense of Russia.”
In addition, they assume global oil prices to hold up in FY26, “which would bode well for India’s macro stability and economic growth prospects. That said, the margin of error in our growth estimates has increased due to the uncertainties relating to the duration of the higher US tariffs, potential retaliation and exchange rate movements,” added Gupta.
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