Goldman Sachs Forecasts India's Moderate Economic Growth Ahead

Goldman Sachs predicts India's GDP growth rate will moderate to 6.8% in FY27 from a revised 7.4% in FY26. Despite this, inflation is likely to remain high, limiting RBI's scope for rate cuts. The bank anticipates urban demand boost from possible rate cuts and GST rationalization, alongside improved currency performance.

Goldman Sachs has projected a moderation in India's GDP growth rate to 6.8% for fiscal year 2027, following a 7.4% estimate for FY26. This outlook comes amidst limited leeway for interest rate cuts due to persisting inflation pressures, forecasted at 3.9%, close to the Reserve Bank’s target of 4%.

The report emphasizes subdued private capital expenditure in previous years and the impact of U.S. tariffs on capital growth in 2025. However, potential rate cuts and GST rationalization could stimulate urban demand, driving bank credit growth to 13% in 2026, according to the brokerage.

Additionally, Goldman Sachs notes a reduction in fiscal tightening's drag on GDP growth, forecasting a fiscal deficit narrowing to 4-4.2% in FY27. The report also hints at a carrelief in the rupee's performance and a stable current account deficit at 1% for 2026, contingent on low oil prices.