Goldman Sachs India sees the United States reducing “reciprocal” tariffs on Indian goods as a positive move. The brokerage notes that this change is likely to boost India’s exports, raise GDP growth modestly, and improve trade balances, particularly for sectors with strong export surpluses.
The tariff has been cut to 18% from 25%. The additional 25% duties on Indian imports linked to Russian oil have also been removed.
According to Goldman Sachs, the move brings Indian tariffs in line with most other Asian countries, which typically have tariffs of 15–19%. 1. India’s Trade surplus with the US doubles
Goldman Sachs India writes, “India’s bilateral goods trade surplus with the US has doubled in nominal terms over the last 10 years, growing from around $20 billion (1% of GDP) in CY15 to $40 billion (1% of GDP) in CY25 (year-to-date). This increase has been mainly driven by higher surpluses in sectors like electronics, pharmaceutical products and textiles.”
Electronics exports to the US reached $23.7 billion from January to November 2025, chemicals $14.1 billion, textiles $9.7 billion, and pharmaceuticals $9.1 billion. The report notes that US imports of Indian goods are concentrated in these sectors, which are expected to benefit further from lower tariffs.
Goldman Sachs also mentions that India’s crude oil imports from the US increased to around 7% of total imports in FY26 (up to November 2025), up from 4% in FY25.
The report emphasizes that the tariff reductions provide India with a structural advantage in maintaining export growth to the US.
2. Boost to GDP growth
According to Goldman Sachs India, the reduction in tariffs could provide an incremental 0.2 percentage points of GDP growth annually. “This 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,” the report notes.
The brokerage also observes that lower trade-policy uncertainty may improve private investment intentions, which could support GDP growth in the latter half of CY26. Overall, Goldman Sachs India raised its CY26 real GDP growth forecast by 20 basis points to 6.9% year-on-year.
The report highlights that the tariff reduction helps reduce drag on economic growth caused by previous higher tariffs and provides a modest but meaningful stimulus to India’s economy.
3. Sectoral benefits from tariff cuts
Goldman Sachs India points out that sectors with the largest trade surpluses stand to gain the most. “The removal of the additional 25% tariff linked to Russian oil purchases and the reduction of reciprocal tariffs to 18% will positively affect exports in electronics, pharmaceuticals, textiles, and chemicals,” the report says.
Exports of electronics, pharmaceuticals, and chemicals to the US dominate India’s trade surplus. The report notes that the effective tariff on Indian goods has fallen from 17.8 percentage points to 13.3 percentage points after negotiation, reducing the cost disadvantage of Indian products in the US market.
The report also observes that the increased purchases of US crude oil by India provide additional scope for energy diversification, supporting sectors dependent on stable energy supply.
4. Narrowing current account deficit
Goldman Sachs India states, “India’s current account deficit likely widened significantly to around 2.8% of GDP in Q4 CY25 from 1.3% of GDP in Q3 on lower exports to the US following higher tariffs and a surge in gold imports. With the ‘reciprocal’ tariffs on India’s exports to the US now lowered, we estimate the current account deficit to narrow by around 0.25% of GDP in CY26 to 0.8% of GDP (GSe).”
The report highlights that this narrowing results from improved export conditions and the removal of the additional duties on Russian oil. Lower trade-related uncertainty could also support broader economic stability.
Goldman Sachs India emphasizes that energy diversification and improved trade balances together contribute to a more resilient macroeconomic position for India in CY26.
5. Strengthened Energy Imports
The report underlines that India has increased its crude oil imports from the US to around 7% of total crude oil imports in FY26 (up to November 2025), up from 4% in FY25. Goldman Sachs notes, “President Trump on his social media account also announced increased purchases of US energy by India.”
The removal of the 25% tariff linked to Russian oil imports reinforces India’s ability to diversify energy sources. This development reduces trade frictions and enhances the overall predictability of India’s energy supply, which is crucial for industrial and manufacturing sectors.
The report emphasises that the combination of lower tariffs, energy diversification, and stable trade relations can support sustainable growth in exports and GDP in the near term.
Conclusion
Goldman Sachs India concludes that the reduction of US tariffs on Indian goods to 18% and the removal of additional duties on Russian oil purchases is likely to provide a modest boost to GDP, improve India’s trade surplus, and benefit sectors with strong US export demand.
The brokerage firm estimates CY26 GDP growth at 6.9% year-on-year, and expects the current account deficit to narrow to 0.8% of GDP, based solely on changes in trade conditions. The sectors poised to gain most include electronics, pharmaceuticals, textiles, and chemicals, with additional support from increased energy imports from the US.