After the finalization of the trade agreement between India and America, positive signs have emerged regarding India’s economic outlook. Global investment bank Goldman Sachs has said in its latest report that the reduction in reciprocal tariffs imposed by the US on Indian goods will support India’s economic growth, investment climate and external balance.
US President Trump announced through social media that the reciprocal tariff on Indian goods has been reduced from 25 percent to 18 percent, which will be effective immediately. Goldman Sachs says the move will now bring India’s tariff rate in line with the 15-19 percent range of most Asian countries.
GDP will increase by more than 0.2% on annual basis
The report says that if the US continues to impose reduced tariffs on Indian goods, it will benefit India’s economy. Due to this, the country’s GDP may increase by about 0.2 percent on an annual basis. This estimate has been made because about 4 percent of India’s total GDP is related to the export of such goods which are in demand in America. Also, this assessment has been made keeping in mind that there is a possibility of demand for these goods increasing if the tariff is reduced.
On the investment front, Goldman Sachs believes that this agreement will reduce uncertainty regarding trade policy, which will increase the confidence of private investors. The report said a recovery in private capital expenditure (capex) could further strengthen real GDP growth in the second half of calendar year 2026.
India’s GDP growth forecast expected to increase
Keeping all these factors in mind, Goldman Sachs has increased India’s real GDP growth forecast for calendar year 2026 by 20 basis points to 6.9 percent.
Current account deficit may decline
In terms of external balance, the report said that due to reduction in tariffs on Indian exports to the US market, the current account deficit can come down from about 0.25 percent of GDP to 0.8 percent in the calendar year 2026. Additionally, easing of trade tensions is likely to improve capital inflows, which is expected to ease pressure on the rupee and stabilize financial conditions.
