World Bank warns U.S. tariffs on Indian exports to drag South Asia’s growth

The World Bank has warned that newly imposed ￰0￱ on Indian exports could weigh on South Asia’s economic growth in ￰1￱ the region remains resilient for now, supported by strong public investment, the impact of rising trade tensions is expected to emerge next ￰2￱ in South Asia is forecast to decelerate from 6.6% in 2025 to 5.8% in the following year, the World Bank said in its latest South Asia Development Update released on ￰3￱ report includes India, Bangladesh, Sri Lanka, Nepal, Bhutan, and the ￰4￱ downgrade reflects the anticipated drag from higher tariffs on Indian goods when exported to U. S. markets, as well as weaker overall export ￰5￱ Indian exports and labour-intensive industries The slowdown is largely attributed to trade tensions between the United States and ￰6￱ Donald Trump had earlier this year announced a 50% “import tariff” on nearly half of all Indian exports, one of the most aggressive tariffs ever levied on any US trade ￰7￱ move covers trade in approximately $50 billion worth of exports, and India’s labor-intensive sectors are likely to be hit the ￰8￱ like textiles, gems and jewellery, leather goods, and shrimp are particularly feeling the ￰9￱ in these sectors tend to be small and medium-sized enterprises that depend heavily on the U.

S. market, which accounts for approximately one-fifth of India’s total ￰10￱ three-quarters of Indian goods sold to the United States are now being levied these ￰11￱ World Bank stated that while the Indian economy is currently bolstered by government spending and domestic demand, these tariffs will have a gradual negative impact on growth from the middle of this ￰12￱ Minister Narendra Modi’s government has been making aggressive strides to alleviate the ￰13￱ month, officials announced the largest tax overhaul since 2017, slashing duties on many goods — from shampoos to automobile parts — to spur domestic consumption and business ￰14￱ doing so, India has continued to increase spending on infrastructure – including roads, railways, and energy projects – in the hope of spurring economic growth and private ￰15￱ steps are part of a larger plan to strengthen India’s growth foundation amid a global ￰16￱ World Bank has raised its projection for India’s growth in the current fiscal year (through March 2026) to 6.5%, from 6.3%.

However, it reduced its forecast for the next fiscal year to 6.3%, partly due to the expected drag from tariffs and softer global ￰17￱ Asia’s regional ripple effects India’s economic slide seems certain to wash across its neighbors as ￰18￱ the largest economy in South Asia, India accounts for more than 75% of the GDP in this subregion; as such, trade and investment linkages carry significant implications for countries such as Bangladesh, Nepal, and Sri Lanka. Bangladesh, for example, whose textile and garment exports end up in goods sold around the world, may see less demand for the intermediate goods it ships to ￰19￱ Lanka, which is dealing with a financial crisis of its own, heavily relies on tourism and trade links with India, which could fade if growth outpaces the need for ￰20￱ and export earnings could also fall for Nepal and Bhutan, destination countries with economies closely connected to India’s.

The World Bank report stated that the slowdown in Indian exports would have a ripple effect throughout the region, affecting its industrial supply chains, transportation, and trade ￰21￱ diversification for South Asia is a key long-term lesson to draw from its current ￰22￱ advise, among other things, increasing exports to emerging markets in Africa, Southeast Asia, and Latin America, as well as investing more in value-added industries, to reduce dependence on just one or two key trade ￰23￱ World Bank also highlighted the importance of regional cooperation, including in technology, green energy, and digital ￰24￱ regional integration of South Asian economies could help reduce external shocks and open new markets.

India’s Finance Minister, Nirmala Sitharaman, stated that the government would continue to increase its capital spending and support industries through credit and innovation. Don’t just read crypto ￰25￱ ￰26￱ to our newsletter. It's free .