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Goldman Sachs Cautions on India Growth as Investment Momentum Stays Weak
Indian Economy: India's GDP is projected to grow at 7.4% in FY2025-26, up from 6.5% last year. This growth will be driven primarily by growth in the manufacturing and service sectors. Let's explore this in detail.
The growth rate of the Indian economy is set to slow down in the year 2026-27. Foreign brokerage firm Goldman Sachs stated this in a recent report. According to the report, India's GDP growth rate is expected to fall to 6.8% in FY27. This estimate is lower than the 7.3% forecast by Goldman Sachs for FY2026.
The data, however, showed that the growth forecast for 2026 would be 7.4 percent, a slight increase over the estimate made by the brokerage firm.
A Goldman Sachs report projects India's real GDP growth at 6.7 percent for calendar year 2026 and 6.8 percent for fiscal year 2027. The report highlights that private sector capital expenditure, or new investment, which helps drive growth, has been sluggish in recent years. Furthermore, US tariffs have negatively impacted capital expenditure in 2025.
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The hopes regarding relief on the monetary policy side seem to be limited. According to the report, the anticipated level of headline inflation for 2026 is at 3.9 percent, which is very close to the 4 percent target fixed by the Reserve Bank of India (RBI). In the wake of such low inflation levels and conditions on the monetary policy side, the scope seems limited for the central bank to reduce interest rates.
However, the report also suggests a possibility that if uncertainty surrounding US tariffs persists beyond the first quarter (Q1) and impacts growth, a further rate cut of 0.25 percentage points may be possible.
