More Stories

Informist, Friday, Apr. 4, 2025

 

--Goldman Sachs sees 30 bps hit to India 2025 growth from US tariffs

--Goldman Sachs: Now see RBI cutting repo rate by 50 bps more in 2025

 

MUMBAI – India's GDP growth in 2025 is seen lower by as much as 50 basis points in 2025 because of the direct and indirect effects of reciprocal tariffs by the US, according to Goldman Sachs, whose economists expect the Reserve Bank of India's Monetary Policy Committee to cut interest rates more aggressively this year to counter the growth slowdown at a time of contained inflation.

 

"Overall, we estimate 30 bps drag on CY25 (2025) growth from the 'reciprocal' tariffs. There is a further 20 bps growth drag from services export slowdown, following the recent US GDP growth downgrade by our economists, and lower Q1 (Jan-Mar) growth tracking (given tepid high-frequency data)," Goldman Sachs economists led by Santanu Sengupta said in a report on Thursday, adding that there was a risk of "additional growth cuts depending on where tariff rates settle, which in part will depend on negotiations".

 

The investment bank has lowered its GDP growth forecast for India by 30 bps to 6.1% for 2025. In 2026, growth is again seen at 6.1%, 20 bps lower than estimated earlier. In calendar year 2024, the Indian economy expanded 6.7%.

 

"Given the growth drag, and with sub-4% inflation forecast by Q4 (Oct-Dec), we forecast an additional 50 bps monetary policy easing in CY25--25 bps each in Q2 (Apr-Jun) and Q3 (Jul-Sept), totaling 100 bps of rate cuts in this cycle," Goldman Sachs said, adding that its forecasts account for around 20% of the effective reciprocal tariff being negotiated down.

 

The prediction of a deeper easing cycle by the Indian central bank comes days before the MPC announces its interest rate decision on Wednesday, where it is widely expected to follow up February's rate cut with another 25-bps reduction in the policy rate. India's growth had already showed clear signs of slowing down before the US slapped a reciprocal tariff of 26% on India earlier this week. The higher tariffs, which Goldman Sachs estimates will result in an effective increase of 19.5 percentage points after netting for exclusions and other tariffs, will come into effect next week.  End

 

Reported by Siddharth Upasani

Edited by Avishek Dutta

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.