India's Economic Growth: Goldman Sachs has stated that India's economic fundamentals will continue to support strong growth. However, if uncertainty surrounding the India-US trade deal persists for a prolonged period, the RBI may be forced to further reduce the repo rate.
According to the investment banking firm, if trade deal-related difficulties persist beyond the first quarter of the next fiscal year, growth will begin to be impacted, and the RBI may, in such a case, take steps to reduce the repo rate to support the economy.
Goldman Sachs stated that the recovery among low-income households in rural and urban areas is still in its early stages. This recovery is being supported by good crop production, direct payments to women by various states, and GST reductions.
It believes that despite global uncertainty, these steps are gradually boosting demand.
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Goldman Sachs' Chief India Economist Shantanu Sengupta expressed hope that the India-US trade deal will be finalized by the first quarter of the next fiscal year.
However, he warned that if the agreement is delayed until the second half of the next fiscal year, growth could be hampered.
In such a situation, the government and the RBI may have to take steps to support the economy.
Sengupta stated that India's overall consumption outlook remains positive, but the income picture is mixed.
AI Creates Challenges For Middle-income groups
Sengupta further stated that the middle-income group is facing challenges due to concerns about the increasing use of Artificial Intelligence (AI).
On the policy front, the central government has focused on supporting consumption through income tax relief and GST reductions in the current fiscal year.
This helped India register a strong real GDP growth of 7.6 percent year-on-year in calendar year 2025. However, excluding the pandemic period, nominal GDP growth has fallen to a six-year low.