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Goldman Sachs has flagged a positive macroeconomic outlook for India following the conclusion of the US-India trade deal that lowers American reciprocal tariffs on Indian goods to 18%.
In its report titled "India: US-India conclude trade deal: President Trump lowers 'reciprocal' tariffs on India to 18%", Goldman Sachs noted that President Trump announced on social media a reduction in the reciprocal tariffs on Indian goods imports to 18% down from the earlier 25%, 'effective immediately'. The report added that "on implementation, the deal would lower India's tariff rate and bring it in line with most other Asian countries of around 15-19%" Assessing the growth impact, Goldman Sachs said, "we estimate an incremental boost of around 0.2pp of GDP (annualized), if the new lower tariffs are enforced" The estimate is based on India's goods exports exposure of roughly 4% of GDP to US final demand and a goods export demand elasticity of ~0.7. On investment sentiment, the report stated that the conclusion of the deal would "reduce trade-policy uncertainty and improve private investment intentions," while adding that "there could be further upside to real GDP growth from a recovery in private capex in the latter half of CY26" Reflecting these factors, Goldman Sachs said, "overall, we raise our CY26 real GDP growth forecast by 20bp to 6.9% yoy" From an external balance perspective, the report highlighted that "with the 'reciprocal' tariffs on India's exports to the US now lowered, we estimate current account deficit to narrow by around 0.25% of GDP in CY26 to 0.8% of GDP" Goldman Sachs also pointed out that easing trade tensions could support financial conditions, noting that a recovery in capital flows "would ease some pressure on the INR". (ANI)
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