The World Bank has warned that higher U.S. tariffs on Indian exports could weigh on South Asia’s economic growth next year, even as government spending shields the region in 2025.
According to the World Bank’s latest report, growth in South Asia—which includes India, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives—is expected to slow sharply to 5.8% in 2026, down from a projected 6.6% in 2025. The downgrade reflects the ongoing impact of higher-than-expected U.S. tariffs on Indian goods.
For India specifically, the World Bank has raised its growth forecast for the current fiscal year ending March 2026 to 6.5% from 6.3%, but trimmed the projection for the next fiscal year to 6.3% from 6.5% due to U.S. tariffs.
U.S. President Donald Trump has imposed a 50% tariff on most Indian exports, affecting about $50 billion worth of goods, mainly from labor-intensive sectors such as textiles, gems and jewelry, and shrimp. In response, Prime Minister Narendra Modi last month implemented a major tax overhaul—the largest since 2017—cutting taxes on products from shampoos to cars, while continuing aggressive infrastructure spending.
About one-fifth of India’s exports in 2024 went to the U.S., with the new tariffs affecting nearly three-quarters of all goods exported to the country.