The multilateral institution has lowered its growth estimate for the region for 2026 from 6.4% to 5.8%

Higher tariffs imposed by the US on imports from South Asian countries could slow down the economic growth rate in the region in 2026, the World Bank said in a report published on Tuesday.

The multilateral institution has lowered its 2026 growth estimate for the region, which includes India, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives, from 6.4% to 5.8%

US President Donald Trump imposed 50% tariffs on most Indian imports in August, which included 25% punitive levies for Indian purchases of Russian oil.

Washington has also imposed 35% tariffs on Bangladesh and 20% on Sri Lanka. 

In its report, the World Bank said Washington's high tariffs hurt the manufacturing sector in South Asia by making it more expensive to import the components and raw materials needed for production.

Other factors that could affect growth in South Asia include spillovers from the global economic slowdown, labor market disruptions, and socio-political unrest, the bank added. 

"India is expected to remain the world's fastest-growing major economy, underpinned by strong consumption growth, improved agricultural output and rural wage growth," the World Bank said in its report. The institution cautioned that it is downgrading the country's growth forecast for the 2026-27 fiscal year to 6.3% from 6.5% "partly due to higher tariffs on exports."

India has the capacity to absorb "shocks" arising from the tariffs, Finance Minister Nirmala Sitharaman said last week. 

The World Bank has forecast accelerated growth for Bangladesh in the current and next fiscal years, while predicting the same for Sri Lanka in 2026. It has, however, predicted slower growth for Bhutan and Nepal in the 2025-26 fiscal year. It added that foreign exchange pressures could slow down growth for the Maldives in 2026.