The World Bank said on Tuesday that higher tariffs on Indian goods exported to the United States would be a drag on South Asia’s economic growth rate in 2026, even if it remains cushioned by government spending this year.
The World Bank said growth in South Asia was expected to slow sharply to 5.8 percent in 2026 from its projection of 6.6 percent in 2025. Its forecast for the region covers India, Bangladesh, Sri Lanka, Nepal, Bhutan and the Maldives.
“By 2026, the forecast has been lowered as some of these effects fade and India continues to face higher-than-expected tariffs on exports of goods to the United States,” the World Bank said in its report.
The World Bank has raised its forecast for India’s growth in the current fiscal year ending March 2026 to 6.5 percent from 6.3 percent, while cutting its projection for the next fiscal year to 6.3 percent from 6.5 percent due to tariffs imposed by the United States.
US President Donald Trump imposed a 50 percent tariff on most Indian exports, one of the highest for any US trading partner.
The measure impacts around $50 billion in Indian exports to the United States, mainly hurting labor-intensive sectors such as textiles, gems and jewelry, and the shrimp industry.
To offset the impact of tariffs, Indian Prime Minister Narendra Modi cut taxes on everything from shampoos to cars last month in the biggest tax overhaul since 2017, even as India continues to spend aggressively on infrastructure projects.
About a fifth of India’s total exports in 2024 went to the United States. The new tariffs affect about three-quarters of all Indian products exported there.
