Investing.com -- UBS lowered its forecast for India’s economic growth in fiscal 2026, citing the impact of sweeping U.S. tariffs that are expected to significantly disrupt global trade and weigh on investment sentiment. Though, Trump on Wednesday said he had authorized a 90-day pause on "reciprocal" and 10% tariffs, effective immediately.

UBS said it now expects India’s real GDP to grow 6% year-on-year in fiscal year 2026, down from its previous forecast of 6.3%. The revision was to reflect the drag from a the imposed 27% reciprocal tariff on Indian exports to the U.S, paused for 90 days, and broader global trade headwinds stemming from U.S. trade policy.

The bank projects just 0.4% GDP growth in the U.S. for 2025, down from 1.6% previously, while China and the ASEAN-5 are also expected to see slower growth.

Despite these pressures, UBS noted that India remains structurally resilient and less exposed to goods trade than its regional peers, with services exports—currently 47% of total exports—providing a buffer.

India is not immune to higher tariffs, but its relative insulation from goods trade and supportive domestic demand should help cushion the blow, the note said.

UBS expects household consumption in India to stay firm amid improving rural demand and easing inflation.

However, the bank flagged a potential delay in private capex recovery, citing weak corporate sentiment and risks from China’s excess manufacturing capacity.

The note also pointed to rising uncertainty in the outlook due to the evolving trade negotiations, global oil prices, and potential retaliation.

India’s Monetary Policy Committee (MPC), which consists of three RBI and three external members, cut the repo rate by 25 basis points to 6.00% as expected.

UBS added that India’s decision to pursue trade talks with the U.S. rather than retaliate immediately could be a medium-term positive if a deal is reached by year-end.