India's GDP outlook firm at 6.9% in 2026: Goldman Sachs

Goldman Sachs has projected that India’s real GDP will remain robust over the next two years, forecasting 6.9 per cent year-on-year (YoY) growth in 2026 and 6.8 per cent in 2027, both above consensus estimates. The outlook follows an estimated 7.7 per cent expansion in 2025, despite headwinds from US tariffs.

Nominal GDP growth in 2025 was at a six-year low, excluding the pandemic period, due to record-low inflation. Headline inflation averaged 2.2 per cent last year, although core inflation rose.

For 2026, Goldman Sachs expects headline inflation to rise to 3.9 per cent YoY, close to the Reserve Bank of India’s 4 per cent target. After cutting rates by 125 basis points in 2025 and injecting significant liquidity, the RBI is seen as having limited scope for further easing, though an additional 25 basis point cut could be considered if US tariff-related uncertainty persists.

A new India–US trade agreement announced in early February reduced ‘reciprocal’ tariffs on Indian goods from 25 per cent to 18 per cent, aligning India’s tariff rate with most Asian peers in the 15–19 per cent range. Goldman Sachs estimates the move could provide an incremental 0.2 percentage point annualised boost to GDP, given that goods exports to US final demand account for roughly 4 per cent of India’s GDP. The deal will improve private investment intentions, the economists said.

“We expect a lag before this translates into actual capex execution and hence we are not incorporating this into our forecasts at the moment. There could be further upside to real GDP growth from a recovery in private capex in the latter half of 2026,” Goldman Sachs said in a release.

The easing of trade tensions is also expected to mitigate investment uncertainty. Earlier, economists had estimated a 0.3 percentage point drag on real GDP growth due to US trade policy uncertainty.

Policy rate cuts, regulatory relaxation for banks, a weaker exchange rate and tax relief measures, including income tax and GST reductions, supported a nascent recovery in urban consumption in 2025.

Recent liquidity measures have injected ₹6.3 trillion (~$70 billion) into the banking system, which should further support credit growth. Sustained rural demand is anticipated in 2026.

India’s current account deficit widened to around 2.8 per cent of GDP in the fourth quarter of 2025, from 1.3 per cent in the previous quarter. However, the full-year deficit for 2025 is expected to remain contained at 0.7 per cent of GDP, supported by strong remittances and an 11 per cent rise in services exports.

For 2026, Goldman Sachs estimates the current account deficit will widen to $37 billion, driven mainly by higher non-oil and non-gold imports amid improving consumption demand.

Fibre2Fashion News Desk (HU)