World Bank: US Tariffs Pose Threat to south Asia Growth in 2026
WASHINGTON D.C. – October 7, 2025 – The World Bank warned Tuesday that recently imposed US tariffs on Indian exports are expected to dampen economic growth across South Asia in 2026, despite current government spending providing a buffer.
The international financial institution projects overall growth in the region – encompassing India, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives - will decelerate sharply to 5.8% in 2026, down from a forecasted 6.6% in 2025.
According to the World Bank’s latest report, the downgraded 2026 forecast stems from the unwinding of current mitigating factors and the continued impact of higher-than-anticipated tariffs levied by the United States on Indian goods.
While the World Bank slightly increased its growth forecast for India’s current fiscal year (ending March 2026) to 6.5% – up from 6.3% – it simultaneously lowered its projection for the following fiscal year to 6.3%, a decrease from 6.5%, citing the impact of US tariffs.
the tariffs,imposed by US President Donald Trump,currently stand at 50% on most exports from India,representing one of the highest rates applied to any US trading partner. This move is estimated to affect approximately $50 billion worth of Indian exports, especially impacting labor-intensive industries like textiles, gems and jewellery, and the shrimp industry.
In response to the tariffs, Indian Prime Minister Narendra modi recently implemented a significant tax overhaul - the largest sence 2017 – reducing taxes on a wide range of goods, from shampoos to automobiles. India is also continuing substantial investment in infrastructure projects.
Data indicates that roughly one-fifth of India’s total exports in 2024 were destined for the United States, with the new tariffs impacting approximately three-quarters of all Indian goods shipped there.
