India’s tariffs have significantly dropped following the US-India trade deal, decreasing from 50% to 18%, making it one of the lowest among key Asian countries. This reduction is expected to enhance India’s export competitiveness, surpassing even Vietnam, a major US trading partner. The SBI Research report highlights the positive impact of the US-India and EU-India trade agreements on India’s economic landscape.
The report anticipates that the Reserve Bank of India will maintain the status quo in its upcoming monetary policy announcement on February 6. Despite recent policy rate cuts, government bond yields have shown a consistent increase, potentially affecting the efficiency of open market operations. The report suggests that the RBI is likely to keep the current policy unchanged.
While global economic conditions remain uncertain, the SBI’s Geo-Economics Stress Index indicates that heightened uncertainty leads to economic stress with a delay of 3-4 months. The report notes a recovery in metal prices post a significant sell-off and predicts possible US Fed rate cuts due to a slack labor market and stagnant real disposable incomes.
In the currency market, the Indian rupee fluctuated between 89-92 per dollar over the past two months, depreciating by 5.8% against the US dollar since April 2, 2025. However, following the India-US trade deal and the reduction of tariffs to 18%, the rupee appreciated by more than Re 1. The report also mentions that the new Consumer Price Index (CPI) weights, coupled with unchanged index domestic inflation, could lead to a marginal increase in overall CPI by 20-30 bps.
