Mumbai: Goldman Sachs has indicated that the Reserve Bank of India (RBI) may consider additional cuts in the repo rate if the India-US trade deal faces further delays. According to the brokerage, ongoing challenges related to trade could impact economic growth, prompting the RBI to ease monetary policy to support the economy.
Trade Deal Delays and Monetary Policy
Goldman Sachs highlighted that if trade-related difficulties continue into the first quarter of the financial year 2027, growth could be adversely affected. In such a scenario, the RBI might lower interest rates to stimulate economic development. This approach would aim to make monetary policy more accommodative amid global uncertainties.
Consumption Trends Across Income Groups
The brokerage noted that consumption recovery in India is still in its early stages, particularly in rural areas and among low-income urban populations. Factors such as a good harvest, state-level cash transfer schemes for women from low-income families, and reductions in Goods and Services Tax (GST) have benefited those at the lower end of the consumption spectrum, gradually improving overall demand.
Goldman Sachs’ Chief India Economist, Shantanu Sengupta, in an interview with NDTV Profit, expressed expectations that the India-US trade agreement would be finalised by the first quarter of financial year 2027. However, he warned that if the deal is delayed beyond this period into the second half of the next financial year, it could pose challenges to growth. In such circumstances, the government and RBI may need to take policy measures to support the economy.
Sengupta also observed that while the overall consumption outlook remains positive, the situation varies across income groups. The affluent consumer segment, including high-income groups, showed strong consumption growth post-pandemic but is now showing signs of slowing down. Meanwhile, the middle-income group faces challenges due to concerns over employment and the increasing use of artificial intelligence.
Fiscal Policy and Economic Growth
On the policy front, the central government adopted a softer stance on fiscal consolidation in the financial year 2026, focusing on boosting consumption through income tax and consumption tax cuts. This strategy helped India achieve a robust real GDP growth rate of 7.6 percent in calendar year 2025. However, nominal GDP growth fell to its lowest in six years, excluding the pandemic period, primarily due to very low inflation.
These developments suggest that while India’s economic fundamentals remain resilient, the timely conclusion of key trade agreements and continued policy support will be critical to sustaining growth momentum.
My name is Bhupendra Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.
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