Goldman Sachs Raises India Growth Outlook and Lowers CAD Projections Following India-US Trade Agreement

Global brokerage firm Goldman Sachs has revised its economic outlook for India, projecting an increase in the country’s GDP growth while simultaneously lowering its estimate for the current account deficit. This positive shift follows the recent announcement of a trade deal between India and the United States, which is expected to benefit Indian exports due to reduced tariffs. Goldman Sachs has raised its forecast for India’s real GDP growth in 2026 to 6.9%, citing the favorable impact of these tariff reductions.

Revised GDP Growth Forecast

Goldman Sachs has upgraded its forecast for India’s real GDP growth for the calendar year 2026 by 20 basis points, bringing it to 6.9% year-on-year. The firm attributes this revision to the anticipated benefits from lower tariffs imposed by the United States on Indian goods. The announcement reflects a broader trend of improving economic conditions, which Goldman Sachs believes will bolster India’s growth trajectory. The firm stated, “We upgraded our forecast for India’s real GDP growth in CY26 by 20bp to 6.9% yoy reflecting the lower US tariffs,” highlighting the significance of the trade deal in shaping its economic outlook.

Improved Current Account Deficit Outlook

In addition to the GDP growth forecast, Goldman Sachs has also revised its estimate of India’s current account deficit (CAD). The firm has lowered its CAD forecast by approximately 0.25% of GDP, now estimating it to be 0.8% of GDP in 2026. This adjustment follows the announcement by U.S. President Donald Trump regarding tariff reductions on Indian exports. A narrower current account deficit is generally viewed as a positive indicator for the economy, especially for a developing nation like India, as it suggests improved external financial stability.

Rupee Performance and Currency Expectations

Goldman Sachs noted that the Indian Rupee has shown resilience since the announcement of the trade deal, emerging as the best-performing currency among emerging markets over the past week. However, the firm does not anticipate significant further appreciation of the rupee from its current levels. Goldman Sachs explained that any potential increase in portfolio inflows resulting from the trade agreement is likely to be counterbalanced by a gradual unwinding of short forward positions and ongoing accumulation of foreign exchange reserves by the Reserve Bank of India (RBI).

Monetary Policy Outlook

On the monetary policy front, Goldman Sachs believes that the cycle of rate cuts in India has reached its conclusion. The firm expects the RBI to maintain the policy repo rate at 5.25% through 2026. It noted that the downside risks to economic growth have diminished due to improved external conditions, which reduces the necessity for further policy easing. This stance reflects a cautious optimism regarding India’s economic landscape in light of recent developments and the anticipated benefits from the trade deal with the United States.

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