Global investment bank Goldman Sachs has revised India’s growth forecast downward for 2025 and 2026, pointing to growing trade tensions with the United States after President Donald Trump announced a 25% tariff on Indian exports. While the direct economic impact of the tariffs is still unfolding, the bigger concern, according to the firm, is policy uncertainty, which could hamper investor sentiment and economic planning.
Goldman trims gdp growth projection
The firm now projects India’s real GDP growth at 6.5% in 2025 (down from 6.6%) and 6.4% in 2026, citing downside risks stemming from uncertainty.
| Year | Previous Forecast | Revised Forecast |
|---|---|---|
| 2025 | 6.6% | 6.5% |
| 2026 | 6.6% | 6.4% |
“Some tariffs may be negotiated lower,” the report notes, “but the real drag comes from the uncertainty they create in business planning and investments.”
Inflation outlook revised down
Goldman also cut its consumer price inflation (CPI) forecasts for both CY25 and FY26 to 3.0%, citing cooling vegetable prices. However, the bank warns this level of low inflation is rare for India and vulnerable to reversal from food, fuel, or currency shocks.
| Period | Previous Inflation Estimate | Revised Estimate |
|---|---|---|
| CY25 | 3.2% | 3.0% |
| FY26 | 3.2% | 3.0% |
Uncertainty outweighs tariffs
While tariffs can directly hit exports, Goldman Sachs highlights that uncertainty around the longevity and scope of trade restrictions could cause greater harm by unsettling investor sentiment and delaying capital expenditures.
Two major factors will influence India’s economic trajectory:
- Resolution of US–India trade disputes
- Any signs of core inflation breaching the 4% level
RBI maintains steady stance
Meanwhile, the Reserve Bank of India (RBI) has left its key policy rate unchanged at 5.5% and retained its FY26 GDP forecast at 6.5%. The RBI has also cut its inflation estimate for FY26 to 3.1%, aligning closely with Goldman’s forecast.
Conclusion
Goldman Sachs’ downward revision signals a cautious approach as global economic conditions shift. While India’s fundamentals remain strong, the coming months will be crucial to resolving trade tensions and maintaining low inflation without derailing growth momentum.
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