Goldman Sachs Boosts India's 2026 Economic Growth Forecast to 6.9% Following US Trade Agreement
In a significant development for India's economic trajectory, Goldman Sachs Research has upgraded its growth projection for the country's economy in calendar year 2026. The global investment bank now anticipates India's real GDP to expand by 6.9% year-on-year, marking a notable increase from its previous estimate of 6.7% made in December.
US-India Interim Trade Agreement Drives Optimistic Revision
The upward revision stems directly from the recently announced framework for an interim trade agreement between India and the United States. On February 6, both nations issued a joint statement outlining a "reciprocal and mutually beneficial trade" arrangement. This framework includes sector-specific tariff reductions, following US President Donald Trump's announcement to lower reciprocal tariffs on Indian exports.
Goldman Sachs explicitly stated in its Monday report: "We upgraded our forecast for India’s real GDP growth in CY26 by 20 basis points to 6.9% y-o-y reflecting the lower US tariffs." One basis point equals one-hundredth of a percentage point, making this a substantial adjustment in economic forecasting terms.
Broader Economic Implications and Fiscal Benefits
The positive effects extend beyond GDP growth projections. Goldman Sachs has also revised its estimate for India's current account deficit downward by approximately 0.25% of GDP, now expecting it to reach 0.8% of GDP in 2026. A current account deficit occurs when a country's foreign exchange outflows surpass its inflows, and this improvement signals enhanced economic stability.
Furthermore, the United States has issued an executive order withdrawing the additional 25% levy previously imposed on India over its purchases of Russian oil. This removal of punitive measures contributes to the improved trade environment between the two economic powers.
Currency Stability and Monetary Policy Outlook
The report highlights that pressure on the Indian Rupee (INR) has eased, with the currency emerging as the best-performing emerging market currency over the past week. However, Goldman Sachs cautions that there is "limited room for it to run from current levels," as any increase in portfolio inflows following the conclusion of the India-US trade deal will likely be met with strategic interventions by the Reserve Bank of India (RBI).
Regarding monetary policy, the bank asserts that India's easing cycle has concluded. The RBI is expected to maintain the policy repo rate unchanged at 5.25%, as downside risks to growth have diminished. This assessment follows last week's decision by the monetary policy committee to keep the key lending rate steady.
Contextual Economic Indicators and Comparative Projections
This optimistic revision arrives approximately one week after India's manufacturing activity demonstrated a rebound in January. The HSBC India Manufacturing Purchasing Managers' Index (PMI) rose to 55.4 from 55.0 in December, according to S&P Global data. The PMI has remained above the 50.0 threshold—which separates growth from contraction—consistently since July 2021.
The Economic Survey for FY26, presented in Parliament on January 30, projected growth between 6.8% and 7.2% for FY27. It characterized the outlook as "one of steady growth amid global uncertainty, requiring caution, but not pessimism." For the ongoing fiscal year (FY26), the survey anticipates economic growth of 7.4%, driven by consumption and investment.
In comparative terms, Moody's projects India's real GDP will grow at 6.4% in the upcoming financial year (2026-27), which would position India as the fastest-growing economy among G20 nations. Goldman Sachs' revised forecast of 6.9% for calendar year 2026 thus places India on an even more robust growth trajectory within the global economic landscape.
The convergence of favorable trade developments, improving manufacturing indicators, and stable monetary policy creates a promising economic environment for India as it navigates the complexities of global trade relationships and domestic economic management.
