Global investment bank Goldman Sachs has lowered its GDP growth projections for India, citing increasing trade tensions with the United States following President Donald Trump’s decision to impose a 25% tariff on Indian exports. The bank warned that the broader issue may not be the tariffs themselves, but the policy uncertainty surrounding them—something that could significantly dampen investor sentiment and slow economic momentum.
According to Goldman’s revised outlook:
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India’s GDP is now projected to grow at 6.5% in 2025, slightly down from the earlier estimate of 6.6%.
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For 2026, growth is forecast at 6.4%, a 0.2 percentage point drop compared to the previous projection.
While some of these trade barriers may eventually be negotiated down, the report underlines that uncertainty in trade policy is likely to weigh more heavily on India’s growth trajectory than the tariffs themselves. Unpredictable policy environments can disrupt business decisions, delay investments, and undermine confidence among global stakeholders.
Rare Low Inflation: A Fragile Advantage
Alongside its growth revision, Goldman Sachs also adjusted its inflation forecast downward. The bank now expects consumer price inflation (CPI) to ease to 3.0% in both calendar year 2025 and fiscal year 2026, primarily due to declining vegetable prices.
However, the report adds a note of caution: India has rarely experienced such low inflation rates, and these levels are susceptible to external shocks like food price volatility, oil cost increases, or currency fluctuations. As the report puts it, the projections lie on the “left tail” of India’s historical inflation range, making them particularly vulnerable to sudden reversals.
Tariffs Aren’t the Only Threat
The analysis stresses that while tariffs pose a challenge, the bigger concern is the unpredictability of US-India trade dynamics. The absence of clear timelines or strategic direction leaves exporters and investors uncertain, which could dampen long-term business commitments.
Goldman points to two critical factors that will shape India’s medium-term outlook:
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Whether there is progress in resolving the US–India trade impasse
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If core inflation begins rising toward the 4% mark, which may trigger monetary policy shifts
RBI’s Take: No Immediate Panic
Despite Goldman’s cautious view, the Reserve Bank of India (RBI) has chosen to hold the repo rate steady at 5.5%, maintaining its FY26 GDP growth forecast at 6.5%. The central bank also lowered its own inflation outlook for FY26, bringing it down to 3.1% from a previous 3.7%—in line with Goldman’s figures.
However, like Goldman, the RBI also acknowledged that such low inflation conditions are atypical for India and need to be monitored carefully for emerging risks.
Final Outlook
Although the downward revision in GDP growth is modest, it underscores rising caution in global markets. Trade tensions, compounded by low and potentially unstable inflation, are forcing analysts and policymakers to watch India’s economic path more closely.
In the coming months, India’s ability to navigate its trade disputes with the US and maintain macroeconomic stability will be crucial in determining whether it can sustain its growth momentum without triggering inflationary spikes.