Goldman Sachs Boosts India's 2026 GDP Forecast to 6.9% After US Trade Deal

Reacting positively to the development, Goldman Sachs said it has upgraded its forecast for India's real GDP growth in calendar year 2026 (CY26) by 20 basis points to 6.9 per cent year-on-year, reflecting the benefit of reduced tariffs imposed by the United States.

"We upgraded our forecast for India's real GDP growth in CY26 by 20bp to 6.9 per cent yoy reflecting the lower US tariffs," the brokerage said in its assessment.

On the external front, Goldman Sachs said it has lowered its estimate of India's current account deficit by around 0.25 per cent of GDP to 0.8 per cent of GDP in CY26, following US President Donald Trump's announcement of tariff reduction on Indian exports.

"Following President Trump's announcement of tariff reduction, we had lowered our estimate of India's current account deficit by around 0.25% of GDP to 0.8% of GDP (GSe) in CY26," the firm noted.

Goldman Sachs also pointed out that the pressure on the Indian currency has eased after the trade announcement. It said the Indian Rupee (INR) was the best-performing emerging market currency over the past week. However, the brokerage expects limited further appreciation from current levels.

It explained that any pick-up in portfolio inflows after the conclusion of the India-US trade deal is likely to be offset by a gradual unwind of the short forward book and further accumulation of foreign exchange reserves by the Reserve Bank of India.

On the interest rate outlook, Goldman Sachs maintained its view that India's policy rate easing cycle has concluded. The brokerage expects the RBI to keep the policy repo rate unchanged at 5.25 per cent in CY26, as downside risks to economic growth have receded following improved external conditions.

A narrowing current account deficit is generally seen as a positive signal for the economy, especially for a developing country like India. A lower CAD-to-GDP ratio reflects improved external stability, reduces dependence on volatile foreign capital inflows to fund consumption, and helps ease pressure on the domestic currency.

The positive reassessment comes after India and the United States released a joint statement on February 6, outlining a framework for an Interim Agreement on reciprocal and mutually beneficial trade.

The interim deal details sector-specific tariff reductions, following President Trump's announcement on February 2 to lower "reciprocal" tariffs on Indian exports to the US from 25 per cent to 18 per cent.

The trade deal and tariff relief are now being seen by global investors as supportive of India's growth outlook, currency stability and overall macroeconomic fundamentals.

- ANI