Goldman Sachs raises India’s 2026 growth forecast to 6.9% on lower US tariffs

New Delhi: India’s economy is now expected to grow 6.9% in calendar year (CY) 2026, up from an earlier projection of 6.7%, buoyed by lower tariffs on Indian exports under the framework of an interim trade agreement with the US, Goldman Sachs Research said on Monday.

India and the US released a joint statement on 6 February, outlining a framework for an interim agreement regarding “reciprocal and mutually beneficial trade”. The agreement details sector-specific tariff reductions following US President Donald Trump’s announcement to lower “reciprocal” tariffs on Indian exports.

Further, the US has issued an executive order withdrawing the additional 25% levy imposed on India over its purchases of Russian oil.

“We upgraded our forecast for India’s real GDP (gross domestic product) growth in CY26 by 20bp (basis points) to 6.9% y-o-y reflecting the lower US tariffs,” Goldman Sachs said in a report on Monday.

The US bank had in December projected India's GDP to grow 6.7% in CY26. One basis point is one-hundredth of a percentage point.

Goldman Sachs also said that on account of reduction of tariffs, it has also lowered its estimate of India’s current account deficit by around 0.25% of GDP to 0.8% of GDP in CY26.

A current account deficit occurs when a country’s foreign exchange outflows exceed its inflows. This deficit reflects a nation's foreign transactions and can influence economic stability.

“The pressure on the INR has eased (INR was the best performing EM currency over the past week), but we see limited room for it to run from current levels, as any pick up in portfolio inflows on the conclusion of the India-US trade deal, is likely to be met with a gradual unwind of the short forward book, and further build-up of FX reserves by the RBI,” it said.

It added that India’s monetary policy easing cycle has concluded, and the Reserve Bank of India (RBI) is expected to keep the policy repo rate unchanged at 5.25%, as downside risks to growth have receded. Last week, the monetary policy committee of the central bank kept the repo rate, the rate at which it lends to banks, unchanged at 5.25%.

The Economic Survey for FY26, tabled in Parliament on 30 January, has projected a growth of 6.8-7.2% in FY27. According to the survey, overall, the outlook is “one of steady growth amid global uncertainty, requiring caution, but not pessimism”. Further, for the ongoing financial year (FY26), the survey has projected an economic growth of 7.4% in the ongoing fiscal (FY26), driven by consumption and investment.

According to Moody’s, India's real GDP in the upcoming financial year (2026-27) will grow at 6.4%, the fastest among G20 economies.

Goldman Sachs’ upward revision of India’s GDP growth estimate comes about a week after manufacturing activity rebounded in January, following a slip to a two-year low in the previous month. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 55.4 in January from 55.0 in December, according to data compiled by S&P Global. The PMI has stayed above the 50.0 threshold, which separates growth from contraction, since July 2021.