India's GDP Outlook Trimmed By Goldman Sachs Over Trade Tensions

The fallout isn't just limited to headline growth. While some of the imposed tariffs may be softened through negotiation over time, the broader impact stems from uncertainty

"Further downside risk to the growth trajectory mainly emanates from the uncertainty channel," the report notes

Source : ABPLIVE AI

India's economic trajectory is facing fresh turbulence after U.S. President Donald Trump slapped a 25% "reciprocal" tariff on Indian goods.

In its revised outlook, Goldman Sachs lowered India's real GDP growth projection marginally by 0.1 percentage point for calendar year 2025 (CY25) to 6.5 per cent and by 0.2 percentage point for 2026 (CY26) to 6.4 per cent year-on-year.

However, the report adds that "In our view, some of these tariffs are likely to be negotiated lower over time, and further downside risk to the growth trajectory mainly emanates from the uncertainty channel."

Even as growth slows, the brokerage firm noted that inflation is going down. It revises India's inflation forecasts lower by 0.2 percentage points for both calendar year 2025 and fiscal year 2026, now sitting at 3.0% year-on-year.

The cooling prices are largely attributed to softening vegetable costs. But the report warns that these projections lie in "the left tail of India's historical inflation distribution," pointing out that such low levels are rare and could be vulnerable to unexpected shocks.

The fallout isn't just limited to headline growth. While some of the imposed tariffs may be softened through negotiation over time, the broader impact stems from uncertainty.

"Further downside risk to the growth trajectory mainly emanates from the uncertainty channel," the report notes, underscoring how investor sentiment and business planning are being clouded by the unpredictability of U.S.-India trade relations.

The report flags two key risks that could stall further easing: a swift and amicable resolution of the U.S.-India trade talks, or a sharper-than-anticipated rise in core inflation, particularly if it approaches the 4.0% threshold.

The RBI, however, in its policy statement announced on Wednesday, has kept the repo rate unchanged. The central bank has also maintained its growth projection of 6.5% for the current fiscal, but revised the CPI inflation downwards significantly from 3.7% to 3.1% for FY26.

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)