India's GDP to Hit 6.9% in 2026, US Trade Deal to Add 0.2% Growth

The report from Goldman Sachs Research said, "Our analysts expect an incremental growth boost of 0.2 percentage points of GDP (annualised) with these new tariffs, based on India's goods exports exposure of roughly 4 per cent of GDP to US final demand."

The investment bank expects headline inflation to rise to 3.9 per cent in 2026, close to the Reserve Bank of India's (RBI) target of 4 per cent.

As the RBI cut rates by 125 basis points last year, with a comprehensive set of measures to inject liquidity into the system, there is limited scope for further easing, said Santanu Sengupta, Goldman Sachs Research's chief India economist.

"In 2025, our economists expect India's GDP to have grown at 7.7 per cent year-on-year, despite headwinds from US tariffs-which was the highest imposed on any country in the Asia Pacific region. That said, nominal GDP growth was at a six-year low (excluding the pandemic) due to record-low inflation," the report said.

A combination of policy rate cuts, regulatory relaxation for banks, and a weaker exchange rate eased financial conditions in India, it added. Income tax and GST cuts supported a nascent recovery in urban consumption demand, while the recovery in rural consumption was sustained.

Liquidity measures that injected Rs 6.3 trillion into the banking system should support bank credit growth and real consumption growth is likely to rise around 7.7 per cent in 2026 from 7 per cent in 2025, the report further said.

"Our economists forecast sustained rural consumption in 2026, on a strong winter harvest and continued welfare spending by state governments, particularly those heading into elections," it said.

- IANS