In early February 2026, Goldman Sachs materially revised its outlook on India’s growth trajectory, lifting its real GDP forecast for calendar year 2026 to 6.9%, a 20 basis point upgrade from prior estimates. The revision followed a pivotal development in global trade relations: a newly announced US–India trade agreement unveiled by Donald Trump, under which so-called “reciprocal” tariffs on Indian exports to the United States were reduced from 25% to 18%.

While the numerical tariff reduction may appear incremental at first glance, its timing, scale, and signaling effect have prompted a meaningful reassessment of India’s near-term macroeconomic outlook - particularly across exports, investment sentiment, and the external balance.

Trade Relief as a Direct Growth Catalyst

The most immediate transmission channel identified by Goldman Sachs is improved export competitiveness. Lower tariffs directly reduce the landed cost of Indian goods in the US market, restoring price competitiveness that had been eroded over the past year amid rising trade barriers and global demand uncertainty.

The brokerage estimates that the tariff revision alone could add nearly 0.2 percentage points to India’s GDP in 2026. This impact is expected to be concentrated in labour-intensive export sectors such as:

• Textiles and garments

• Gems and jewellery

• Seafood exports

• Ancillary light manufacturing segments

These industries had been among the most vulnerable to elevated trade frictions. The easing of tariffs has already begun to reflect in improving order expectations, higher capacity utilisation forecasts, and positive equity market reactions across export-oriented counters.

Policy Certainty and the Revival of Private Capex

Beyond the arithmetic boost to exports, Goldman Sachs underscores a second-order but potentially more powerful effect: the restoration of policy predictability.

For much of the past year, uncertainty around US - India trade relations had created hesitation among corporates with cross-border exposure. Capital expenditure decisions - particularly those tied to export capacity, supply chain expansion, and global client contracts - were deferred amid fears of adverse tariff outcomes.

The clarity delivered by the trade agreement is now expected to:

• Improve visibility for exporters

• Reduce regulatory and trade policy risk premiums

• Encourage global investors to reassess India’s positioning in global supply chains

• Potentially revive delayed private capex plans in H2 2026

This shift in investment sentiment is critical because India’s next leg of growth increasingly depends on private sector capex revival, rather than purely consumption or government spending.

External Balance Strengthens Meaningfully

A stronger export outlook combined with easing trade friction has direct implications for India’s current account dynamics.

Goldman Sachs now projects that India’s current account deficit (CAD) could narrow by ~0.25% of GDP, bringing it down to ~0.8%. This improvement is significant for three reasons :

1. Lower external vulnerability in a volatile global capital environment

2. Reduced dependence on short-term capital flows to fund the deficit

3. Enhanced macroeconomic stability and investor confidence

A narrowing CAD at a time when global liquidity conditions remain uncertain is a material positive for India’s macro risk profile.

Currency Response Signals Improving Sentiment

Financial markets have already begun pricing in this improved outlook. The Indian rupee has stabilised and appreciated toward the 90.2/USD mark following the announcement, supported by renewed foreign capital flows and improved confidence in India’s external position.

Goldman Sachs notes that easing trade tensions have:

• Reduced pressure on the currency

• Improved foreign investor sentiment

• Created a more stable financial environment for capital markets

Currency stability further reinforces the virtuous cycle by reducing imported inflation risk and supporting macro stability.

A Trade Deal with Disproportionate Macro Impact

The upward revision in India’s GDP forecast is not merely a reaction to lower tariffs; it reflects a broader re-rating of India’s growth visibility in the context of global trade realignment.

Goldman Sachs’ assessment highlights how:

• Small changes in trade terms can produce outsized growth effects

• Export competitiveness feeds directly into macro stability

• Policy clarity can unlock private investment cycles

• External balance improvements reinforce currency and capital flow stability

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For markets and policymakers alike, the takeaway is clear: India’s growth outlook remains highly sensitive to global trade conditions, and incremental improvements in trade relations can materially alter expectations for growth, investment, and financial stability.

In this context, the US–India trade agreement is not simply a diplomatic development—it is emerging as a macro-economic inflection point that could shape India’s growth narrative through 2026.