India’s economic outlook for CY26 has improved after the United States reduced tariffs on Indian exports, easing pressure on trade and investment sentiment. Following the move, Goldman Sachs raised its real GDP growth forecast for India, pointing to better export competitiveness and lower trade uncertainty.
Goldman Sachs increased its CY26 real GDP growth estimate by 20 basis points to 6.9% after the US cut so-called reciprocal tariffs on Indian goods to 18% from 25%. The investment bank said the decision improves external conditions for India and reduces uncertainty around trade policy. “Given that the announcement of the conclusion of the deal assumed in our baseline in Q1 would reduce trade-policy uncertainty and improve private investment intentions, we expect a lag before this translates into actual capex execution and hence we are not incorporating this into our forecasts at the moment. That said, there could be further upside to real GDP growth from a recovery in private capex in the latter half of CY26. Overall, we raise our CY26 real GDP growth forecast by 20bp to 6.9% yoy,” the bank said in a report.
According to Goldman Sachs, once the revised tariff rate is fully implemented, India will be broadly aligned with most Asian economies that face US tariff levels in the 15% to 19% range. This is expected to ease relative competitiveness pressures for Indian exporters. The bank noted that India’s bilateral goods trade surplus with the US has doubled over the past decade, rising from around $20 billion or 1% of GDP in CY2015 to about $40 billion or 1% of GDP in CY2025 year to date. This growth has been led by stronger exports of electronics, pharmaceutical products and textiles.
The report also highlighted rising energy trade between the two countries. US crude oil accounted for about 7% of India’s crude imports by volume in FY26 up to November 2025, compared with roughly 4% in FY25. President Trump has separately announced higher US energy sales to India, which the bank said could help reduce trade friction. Beyond direct trade effects, Goldman Sachs said lower trade uncertainty itself supports growth, noting that a one standard deviation rise in US trade policy uncertainty could otherwise cut India’s real GDP growth by about 0.3 percentage points.
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