Goldman Sachs lowers India’s growth forecast over Trump tariffs; ‘inflation shocks’ remain a concern
Goldman Sachs has marginally lowered its projections for India’s economic growth following the imposition of a 25 per cent “reciprocal” tariff on Indian goods by US President Donald Trump.
Revised GDP projections
Goldman Sachs gave its revised outlook during these calendar years (CY):
- CY25: Goldman Sachs lowered India’s real GDP growth projection by 0.1 percentage point to 6.5 per cent.
- CY26: The projection was further lowered by 0.2 percentage points to 6.4 per cent year-on-year.
The report also suggests that some of these tariffs are likely to be lowered through negotiation over time.
However, the further downside risk to the growth trajectory mainly emanates from the uncertainty channel, underscoring how investor sentiment and business planning are being clouded by the unpredictability of US-India trade relations.
Inflation outlook
Despite the slowdown in growth, Goldman Sachs noted that inflation is also going down. The brokerage firm revised India’s inflation forecasts lower by 0.2 percentage points for both calendar year 2025 and fiscal year 2026, now sitting at 3 per cent year-on-year.
This cooling of prices is largely attributed to softening vegetable costs. The report, however, warns that such low inflation levels are rare and could be vulnerable to unexpected shocks, further describing them as lying in “the left tail of India’s historical inflation distribution”.
Key risks and contrasting RBI stance
The report highlights two key risks that could prevent further easing of inflation:
- A swift and amicable resolution of the US-India trade talks.
- A sharper-than-anticipated rise in core inflation, especially if it approaches the 4 per cent threshold.
The report’s stance on inflation and growth projections contrasts with the Reserve Bank of India (RBI). In RBI’s policy statement on Wednesday, it has kept the repo rate unchanged.
The central bank has also maintained its growth projection of 6.5 per cent for the current fiscal. However, the RBI revised its Consumer Index Price (CPI) inflation forecast significantly downwards for FY26, from 3.7 per cent to 3.1 per cent.
(With inputs from ANI)
