RBI may cut rates further if India-US trade deal is delayed: Goldman Sachs

Mumbai: India’s strong economic fundamentals continue to support a healthy growth outlook, but prolonged uncertainty over the India–US trade deal could push the Reserve Bank of India to step in with further rate cuts.

According to Goldman Sachs, if trade-related headwinds persist beyond the first quarter of FY27 and start weighing on growth, the RBI may use its remaining policy space to support the economy through additional monetary easing.

The brokerage said India’s mass consumption story, especially in rural areas and among lower-income households in cities, is still in the early stages of recovery.

This recovery is being supported by a good crop cycle, higher state-level transfer payments to women in lower-income families and GST cuts that benefited the bottom end of the consumption ladder.

Goldman Sachs believes these factors are helping demand gradually pick up, even though broader global uncertainties remain.

In an interaction with NDTV Profit, Santanu Sengupta, Chief India Economist at Goldman Sachs, said the India–US trade deal is expected to be finalised by the first quarter of FY27.

However, he warned that if the agreement is pushed beyond this period and into the second half of the next financial year, it could create growth headwinds.

In such a situation, the government and the Reserve Bank of India may need to use their policy space to support the economy.

Sengupta explained that while India’s overall consumption outlook remains positive, the picture is mixed across income groups.

The affluent segment of consumers, which includes the middle and top income groups, saw strong growth after the Covid-19 pandemic but is now showing signs of slowing.

He added that the middle-income segment faces challenges due to concerns around job creation and the increasing use of artificial intelligence.

On the policy front, the central government moderated its fiscal consolidation in FY26 and shifted focus towards supporting consumption through income tax and consumption tax cuts.

This helped India record a strong real GDP growth of 7.6 per cent year-on-year in calendar year 2025. However, nominal GDP growth fell to a six-year low, excluding the pandemic period, mainly because of very low inflation.

IANS