Risks to macroeconomic stability from trade war

Though the RBI maintained its growth projection for FY19 at 7.4%, it has alluded to risks on account of protectionist measures and further escalation in trade tensions in its policy statement. There are two dimensions to the risks to macroeconomic stability from trade tensions. One dimension, of course, is that if the global economy slows down, it could result in contraction in global trade and hit our export volumes. The second dimension is that of the policy response of central banks globally to counter the effect of trade war i.e. the risk of trade war eventually turning into a currency