What Happened
- Goldman Sachs Research upgraded India's calendar year 2026 GDP growth forecast to 6.9% (from its earlier estimate), citing the positive impact of reduced US tariffs following the India-US interim trade agreement.
- The India-US trade deal announced on 6-7 February 2026 reduced reciprocal tariffs on Indian goods from 25% to 18%, bringing India's tariff rate in line with most other Asian countries (15-19% range).
- Goldman Sachs estimated an incremental growth boost of 0.2 percentage points of GDP from the tariff reduction, given India's goods export exposure of approximately 4% of GDP to US final demand.
- The firm also lowered India's current account deficit forecast by 0.25% of GDP to 0.8% of GDP in CY2026.
- Goldman Sachs expects India's GDP to grow at 6.8% in CY2027 as well.
Static Topic Bridges
India-US Interim Trade Agreement (February 2026)
On 6-7 February 2026, India and the United States announced a framework for an Interim Trade Agreement — the most significant reset in bilateral trade relations in over a decade. The US lowered its reciprocal tariff on Indian goods from 25% to 18%. India committed to eliminating or reducing tariffs on all US industrial goods and a wide range of US agricultural products. The deal also addressed non-tariff barriers in medical devices and ICT goods.
- US tariff on Indian goods: reduced from 25% to 18%
- India's commitments: tariff cuts on US industrial goods, agricultural products (DDGs, sorghum, tree nuts, soybean oil, wine)
- US concessions: removal of tariffs on certain Indian aircraft parts; preferential tariff rate quota for Indian auto parts
- Additional potential: if the interim agreement succeeds, US would remove reciprocal tariff on generic pharmaceuticals, precious gems, and aircraft parts
- India also committed to addressing non-tariff barriers on US medical devices and ICT goods
Connection to this news: The trade deal's tariff reduction directly feeds into Goldman Sachs' growth upgrade, as lower tariffs improve India's export competitiveness and reduce trade uncertainty — a key drag on private investment.
GDP Measurement and Growth Forecasting
India's GDP is measured by the National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation, using the base year 2011-12. India uses both GDP at constant prices (real GDP) and GDP at current prices (nominal GDP). The advance estimate, first revised estimate, second revised estimate, and third revised estimate are released at specified intervals. Multiple agencies — IMF, World Bank, RBI, and investment banks — provide independent growth forecasts that serve as benchmarks for policy and investment decisions.
- GDP base year: 2011-12
- Measuring authority: National Statistical Office (NSO)
- First Advance Estimate: released in January (for current fiscal year)
- India's Finance Ministry projection (Economic Survey): 6.8-7.2% for FY27
- Moody's projection: 6.4% for FY27 (fastest among G-20 nations)
- Goldman Sachs projection: 6.9% for CY2026
Connection to this news: The divergence between Goldman Sachs (6.9% CY2026), Moody's (6.4% FY27), and India's own Economic Survey (6.8-7.2%) reflects different methodologies, time periods (calendar year vs fiscal year), and assumptions about the trade deal's impact.
Current Account Deficit (CAD) and Trade Balance
The current account of the Balance of Payments records trade in goods and services, primary income (investment returns), and secondary income (remittances). India traditionally runs a current account deficit because its merchandise imports (especially crude oil and gold) exceed exports. The RBI monitors CAD closely as it affects exchange rate stability and external debt sustainability. A CAD above 2.5% of GDP is generally considered a risk threshold for India.
- India's CAD (FY25): approximately 1.1% of GDP
- Goldman Sachs revised CAD estimate for CY26: 0.8% of GDP (reduced by 0.25%)
- Major CAD drivers: crude oil imports (~30% of import bill), gold, electronics
- Key offset: software services exports and remittances (India is the world's largest remittance recipient)
- Comfort zone: CAD below 2.5% of GDP
Connection to this news: The US trade deal's tariff reductions are expected to narrow India's CAD by boosting goods exports, particularly in labour-intensive sectors like textiles, gems, leather, and agricultural goods. Goldman Sachs quantifies this improvement at 0.25% of GDP.
Key Facts & Data
- Goldman Sachs India CY2026 GDP forecast: 6.9% (CY2027: 6.8%)
- US tariff on Indian goods: reduced from 25% to 18% under interim trade deal
- Incremental growth boost from trade deal: 0.2 percentage points of GDP
- India's goods export exposure to US final demand: ~4% of GDP
- Revised CAD estimate: 0.8% of GDP (down 0.25% from earlier estimate)
- Moody's India FY27 GDP forecast: 6.4% (fastest among G-20)
- India's Economic Survey FY27 projection: 6.8-7.2%