Indian economy resilient despite US tariffs, S&P upgrade reflects strong fundamentals: RBI

While the imposition of high US import tariff brought in some headwinds to the domestic macro-outlook, the developments since then have underscored the resilience of the Indian economy, the Reserve Bank has said in its monthly bulletin report for August.

An import tariff of 50% is applicable on India’s exports to the US from August 27, 2025. Its immediate impact may be sector-specific, says the RBI, given that around 45% of India’s merchandise exports to the US are exempted from the tariffs, including sectors constituting major export products, particularly smartphones and pharmaceuticals. Despite the elevated trade policy uncertainties, merchandise exports have shown resilience during April-August 2025-26, shows the data.

The central bank says the S&P sovereign rating upgrade for India was an acknowledgement of its strong macro-fundamentals. Additionally, says the report, the Q1:2025-26 GDP estimates reinforced the resilience of domestic growth drivers. Real GDP growth picked up pace, reaching a five-quarter high in Q1:2025-26, rising to 7.8% (year-on-year) from 7.4 per cent (year-on-year) in the preceding quarter. Consumption and fixed investment remained the key drivers contributing 4.7 percentage points and 2.7 percentage points, respectively.

“High frequency indicators for August show manufacturing and services activity at a decadal high. In this scenario, the growth outlook for H2 is one of optimism. Healthy corporate balance sheets and the focus on structural reforms by the government are the bright spots of the economy,” says the RBI report.