Tanvee Gupta Jain, Chief India Economist at UBS, said India is relatively less vulnerable but not immune.
“We are seeing 50-100 basis points (bps) downside on our global gross domestic product (GDP) growth forecast,” Jain said.
UBS has slashed its US GDP growth forecast, projecting a sharp slowdown. The US economy is now expected to grow by just 0.4% in 2025, down from 1.6%. On a broader timeline, real GDP growth in the US is seen falling from 2.8% in 2024 to 1.5% in 2025 and further to 0.8% in 2026. While not signalling a recession yet, Jain noted this reflects a marked deceleration.
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China too, a key driver of global and emerging markets, has seen its 2025 GDP growth forecast reduced to 3.4%.
India’s growth forecast for the fiscal year 2025-26 (FY26) now stands at 6% from 6.3% earlier, even though some of the downside from tariffs was already factored in earlier. “Within EM, India looks like will be one of the least impacted countries, just because we are a more closed economy and a less open economy but we are not immune,” Jain said.
She said the real risk for India lies in the potential postponement of the private corporate capex recovery, particularly if China offloads excess capacity onto other countries.
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Jain identified agriculture, electronics, automobiles, energy, textiles, and alcohol as key sectors vulnerable to the new tariffs. These sectors together account for 50% of India’s exports to the US. However, she noted that bilateral trade negotiations are ongoing and may provide a resolution path.
India, she said, could rebalance trade by increasing imports from the US, particularly in defence and energy, as a way to reduce the existing $46 billion trade surplus with the US.
Amid the global slowdown, lower oil prices may offer partial relief for India. UBS has revised its crude oil assumption downward to $65 per barrel from $75 per barrel. If global prices stay low, there could be room for a ₹5 per litre cut in petrol and diesel prices over the year, Jain said.
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With fiscal space-constrained, Jain expects the burden of supporting growth to fall on the Reserve Bank of India’s (RBI) monetary policy. UBS has upgraded its rate cut forecast, now projecting a total of 125 basis points of easing, up from 75 bps earlier. This would bring the repo rate down to 5.2% by the end of 2025-26.
For the full interview, watch the accompanying video
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