Delays in sealing the India-US trade pact could force the RBI into additional repo rate reductions, according to a fresh outlook from Goldman Sachs. The brokerage firm warns that if trade frictions linger into early FY27, they might dent growth prospects, leading the central bank to loosen policy and inject momentum into the economy.
India’s consumption rebound is gaining traction but remains uneven. Rural regions and urban low-income segments are showing early signs of revival, fueled by strong agricultural yields, targeted cash handouts to women in needy households, and slashes in GST rates. These measures are trickling down to lift spending at the base of the pyramid, offering resilience against international uncertainties.
Goldman Sachs anticipates the bilateral deal to wrap up by the first quarter of fiscal 2027. Speaking to NDTV Profit, Chief India Economist Shantanu Sengupta stressed that postponements beyond this timeline—potentially into H2 of the following year—could spawn growth impediments. In response, authorities might roll out supportive fiscal and monetary measures.
Dissecting demand trends, Sengupta highlighted that while the big picture for consumption looks upbeat, realities differ by demographic. Wealthy consumers surged post-pandemic but are now cooling off. Meanwhile, the middle-income bracket faces headwinds from employment scarcity and AI-driven disruptions in job markets.
Government policy has pivoted towards spurring demand in FY26, easing fiscal tightening and cutting taxes on income and purchases. This helped deliver 7.6% real GDP expansion in 2025, though nominal growth slumped to multi-year lows due to tepid price rises.
The prognosis underscores a delicate balance: trade deal progress is pivotal. Without it, expect RBI to step in with rate relief, prioritizing growth sustenance in a landscape marked by patchy recovery and global volatility.