India’s real GDP growth is projected to reach 6.9% in 2026 and 6.8% in 2027, with the recent US-India trade deal expected to contribute about 0.2 percentage points to annual GDP growth, according to a report by Goldman Sachs Research. The report highlights an anticipated boost of 0.2 percentage points in GDP growth due to new tariffs, based on India’s goods exports exposure to US final demand.
Goldman Sachs Research predicts headline inflation to increase to 3.9% in 2026, aligning closely with the Reserve Bank of India’s target of 4%. The investment bank notes that following the RBI’s rate cuts of 125 basis points last year and efforts to infuse liquidity into the system, there is limited room for further easing, as stated by Santanu Sengupta, Chief India Economist at Goldman Sachs Research.
The report mentions that despite challenges from US tariffs, India’s GDP is expected to have grown by 7.7% year-on-year in 2025, with nominal GDP growth at a six-year low (excluding the pandemic) due to record-low inflation. Financial conditions in India were eased by a combination of policy rate cuts, regulatory relaxations for banks, and a weaker exchange rate. Additionally, income tax and GST cuts helped boost urban consumption demand, while rural consumption recovery remained steady.
With liquidity injections of Rs 6.3 trillion into the banking system, the report anticipates support for bank credit growth and a rise in real consumption growth to around 7.7% in 2026 from 7% in 2025. The report also forecasts continued rural consumption growth in 2026, driven by a strong winter harvest and ongoing welfare spending by state governments, especially those approaching elections.
