Goldman Sachs has adopted a more optimistic view on India's external sector, forecasting a balance of payments (BoP) surplus in 2026 after two consecutive years of deficits. The investment bank noted that the recent weakness in the rupee does not reflect the underlying strength of India's external fundamentals.
BoP Surplus in Q1 2026
According to Goldman Sachs' report titled "India: A More Favourable Balance of Payments Outlook," India recorded a BoP surplus of USD 7.2 billion in the first quarter of 2026. This was bolstered by a current account surplus of USD 7.0 billion, driven by lower-than-expected oil imports, stronger remittances, and robust services exports.
Rupee Weakness Attributed to Geopolitical Uncertainty
The bank attributed the divergence between the rupee's performance and India's external fundamentals to heightened geopolitical uncertainty. It stated that the pressure on the currency was driven more by precautionary and speculative demand for dollars rather than a deterioration in India's fundamental external position.
Declining Oil Vulnerability
Goldman Sachs highlighted that India's vulnerability to oil price shocks has diminished over time. The report noted that India's oil intensity has declined steadily over the past three decades due to improvements in energy efficiency, greater electrification of transportation, and a shift towards less energy-intensive growth sources.
It also observed that oil import volumes have become increasingly responsive to higher crude prices. With Brent crude averaging around USD 90 per barrel in 2026, a 10% price rise is associated with approximately a 6% decline in net import volumes, helping offset the impact on the trade balance.
Gold Imports and Policy Measures
On gold imports, the report noted that policymakers have historically used import duties to manage external pressures. Higher import duties were typically followed by a decline in gold import volumes, with the impact beginning after a one-to-two-month lag and becoming fully visible over five to six months.
Revised CAD Forecast
Following stronger-than-expected external sector data, Goldman Sachs revised its current account deficit (CAD) forecast sharply lower. It now expects India's CAD to narrow to USD 46 billion, or 1.3% of GDP, in 2026, compared with its earlier estimate of USD 78 billion, or 2.0% of GDP.
Policy Support for Capital Inflows
Goldman Sachs also expects recent measures by the Reserve Bank of India (RBI) and the government to support foreign capital inflows. These include incentives for foreign currency non-resident deposits, concessional swap facilities for external commercial borrowings, and tax benefits for foreign investors in government securities.
The report estimated around USD 60 billion of inflows from the various measures announced by the RBI to incentivize dollar flows in 2026.
BoP Surplus Outlook
As a result, Goldman Sachs expects India to record a BoP surplus of around 0.6% of GDP in both 2026 and the fiscal year 2027. The improved external position should ease depreciation pressures on the rupee, but a sharp appreciation is unlikely as the RBI is expected to absorb much of the incoming foreign exchange through reserve accumulation.
Overall, the report paints a favourable picture of India's external accounts, supported by resilient remittances, strong services exports, lower oil intensity, and policy measures aimed at attracting foreign capital.
