Goldman Sachs has upgraded India’s real GDP growth for 2026 by 20 basis points to 6.9% year-on-year (YoY) after the US lowered the tariff to 18%. Goldman Sachs estimates that the effective tariff rate imposed by the US on Indian imports may be around 20 percentage points lower than the 34% earlier.
However, it noted that component-level details will provide clarity. How will this impact the key economic parameters? Goldman Sachs has reduced the estimates for the current account deficit but see limited upside for the currency.
Goldman Sachs cuts India CAD estimate
The brokerage has lowered its estimate of India’s current account deficit by around 0.25% of GDP to 0.8% in 2026, citing improved trade conditions.
“Following US President Trump’s announcement of tariff reduction, we had lowered our estimate of India’s current account deficit by around 0.25% of GDP to 0.8% of GDP in CY26,” Goldman Sachs noted.
Goldman Sachs says pressure on rupee easing, sees limited upside
However, the international brokerage doesn’t anticipate a big uptick in the rupee. Goldman Sachs noted that the pressure on the rupee has eased in recent days, with the currency emerging as the best performer among emerging markets last week. However, they expect limited gains going forward from current levels.
“The pressure on the rupee has eased, but we see limited room for it to run from current levels as any pick up in portfolio inflows on the conclusion of the India-US trade deal, is likely to be met with a gradual unwind of the short forward book, and further build-up of FX reserves by the RBI,” Goldman Sachs said in its report.
RBI likely to remain on pause: Goldman Sachs
On monetary policy, the firm maintains that the rate-easing cycle has ended and expects the Reserve Bank of India to keep the repo rate unchanged at 5.25% through 2026.
Gems, textiles seen as key winners of India-US tariff reset
Textiles along with the gems and jewelery sector is expected to benefit as the tariff is expected have been reduced to zero from 50% earlier.
The Goldman Sachs report said exports of textiles and gems and jewellery to the US fell sequentially in October 2025 after exporters front-loaded shipments to the US until August 2025.
However, India has excluded genetically modified products, cereals and dairy items from tariff concessions. Goldman Sachs estimates that around 60–70% of India’s farm imports from the US could face zero or lower tariffs under the agreement.
Markets await clarity as India-US trade talks
Overall, Goldman Sachs sees the effective tariff rates on Indian exports to the US may decline by around 20 percentage point. The report specified that component-wise details for machinery, metals and transport is still not available, but based on their estimates, they see effective tariff around 15-18%. But reiterated that they await sector-specific details for greater clarity.