Goldman Sachs has raised a red flag: extended delays in the India-US trade agreement might push the RBI to deliver more repo rate cuts. The firm argues that ongoing trade hurdles spilling into FY27’s opening quarter could impair expansion, compelling the central bank to simplify policy through lower rates and foster economic vitality.
At the heart of this caution is India’s staggered consumption uptick. Lower rungs—rural dwellers and urban poor—are just beginning to spend more, thanks to abundant harvests, state-level cash aids for low-income women, and GST relief. These tailwinds are methodically rebuilding demand from the ground up, defying broader global instability.
Chief India Economist Shantanu Sengupta, in an NDTV Profit conversation, pegged deal closure to Q1 FY27. He warned of ripple effects if it drags to the next fiscal’s latter half, potentially stalling momentum and requiring government-RBI interventions to prop up activity.
Consumption divides along income lines paint a nuanced story. Affluent buyers powered a post-COVID boom that’s now faltering, while mid-tier earners battle job shortages and AI’s encroachment on employment. Overall sentiment stays constructive, but vulnerabilities persist.
Policy choices reflect this focus: FY26 saw moderated fiscal discipline, with tax reductions on earnings and goods to ignite buying. Real GDP roared to 7.6% in 2025, but nominal figures dipped to pandemic-excluded lows on weak inflation.
This analysis spotlights trade talks as a linchpin. Delays could accelerate easing cycles, with RBI at the forefront to safeguard growth amid fragile recoveries and external pressures.