“This is the most discussed topic, even during our conference,” Jain said. “Our base case is that the reciprocal tariff in India, including the current 50% penalty, gradually comes down to 15% by December 2025.” She added that the penalty itself could be withdrawn as early as November, which would help lift investor sentiment and remove one of the “biggest hindrances” for capital flows into India.
UBS expects India’s gross domestic product (GDP) growth to remain strong at 6.8% in the fiscal year 2025-26 (FY26), supported by domestic demand, policy easing, and a GST rate cut that took effect in late September. For the fiscal year 2026-27 (FY27), growth is expected to stabilise around 6.4%, slightly below market consensus. Jain said the outlook assumes global growth improving to about 3.1% in 2026, after a temporary slowdown caused by tariffs and weaker exports.
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“The biggest driver of growth next year will be household consumption,” she said, citing nearly $60 billion in policy support in 2025-26 that will likely continue into 2026-27. Rural consumption, she added, has also been improving.
Jain outlined two key upside risks to India’s growth: stronger-than-expected global recovery and an emerging AI-driven productivity boost, which could lift India’s GDP growth by 20–30 basis points in 2026-27. Structural reforms in areas like land, labour, and capital could further push growth toward 6.5–7%, she said.
On currency and rates, Rohit Arora, Head of Asia FX & Rates Strategy at UBS, said the US dollar is expected to remain mildly stronger through 2026 after a short-term dip. “We see the dollar index a few percentage points higher from current levels,” he said, adding that most emerging market currencies may weaken by 2–3%.
Arora expects the rupee to hover around 88–89 per dollar in the next few months, before moving toward 90 by the end of next year, reflecting both global trends and active domestic management.
For the full interview, watch the accompanying video
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