World Bank:US Tariffs on Indian Exports May Slow South Asia’s Growth in 2026

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The World Bank has warned that new US tariffs on Indian exports could partially slow economic growth in South Asia next year. The global financial institution stated that while the region remains one of the fastest-growing in the world, rising trade barriers could create headwinds for exports and manufacturing-led recovery.

Impact on India and South Asia

According to the World Bank’s latest regional economic outlook, India’s export sector could face increased pressure if Washington enforces higher tariffs on key goods such as textiles, steel, and pharmaceuticals. Since India contributes nearly three-fourths of South Asia’s total GDP, any slowdown in its export performance is expected to affect neighboring economies like Bangladesh, Sri Lanka, and Nepal.

The report noted that “trade restrictions imposed by large economies tend to ripple across regional supply chains,” emphasizing the need for South Asian nations to diversify both their export destinations and product portfolios.

Despite the challenges, the World Bank projected South Asia’s GDP growth to remain robust at 5.4 percent in 2026, compared with an estimated 5.8 percent in 2025. The slight dip, it said, will largely be due to external trade pressures, tighter global financing conditions, and weaker industrial output in the export-driven sectors.

India’s domestic demand, strong service exports, and continued infrastructure spending are expected to cushion the overall slowdown.

The World Bank has urged governments in the region to strengthen local manufacturing capacity, improve logistics efficiency, and enhance digital trade infrastructure. It also recommended greater regional cooperation to mitigate global trade disruptions.

The report concludes that while South Asia remains a growth leader globally, the pace of expansion will depend on how countries adapt to shifting trade patterns and tariff regimes. India’s ability to balance export competitiveness with domestic investment will be key to sustaining regional economic momentum.