Goldman Sachs has lowered its forecast for India's current account deficit (CAD) in 2026 to 1.3% of GDP, down from a previous estimate of 2%. The firm also projects a balance of payments surplus for the same year, citing factors like strong remittances, robust services exports, and reduced oil imports.
The revised forecast suggests a stronger external position for India, potentially leading to greater financial stability and reduced vulnerability to global economic shocks. Improved capital inflows could support economic growth and currency stability.
Goldman Sachs has revised its outlook for India's external finances, projecting a lower current account deficit (CAD) for 2026 and anticipating a balance of payments (BoP) surplus. The firm's updated forecast places the 2026 CAD at 1.3% of GDP, a reduction from the previous 2% estimate, and forecasts a BoP surplus of 0.6% of GDP, moving from deficits in prior years.
This revised outlook is supported by India's recent performance, which saw a $7.2 billion BoP surplus in the January-March quarter. This surplus was bolstered by strong remittances, robust services exports, and a decrease in oil imports. Goldman Sachs noted that this reflected precautionary dollar demand amid geopolitical uncertainties in West Asia.
Looking ahead, Goldman Sachs acknowledges that higher oil prices could widen India's CAD. However, the firm believes the impact will be less severe than in previous energy shock episodes, attributing this to lower oil intensity, improved energy efficiency, and greater price sensitivity of oil demand. The depreciation of the rupee is largely seen as a result of precautionary dollar demand rather than a fundamental weakening of India's external position.
Furthermore, the report highlights recent measures by the Reserve Bank of India (RBI) aimed at boosting foreign currency inflows. These include incentives for foreign currency non-resident account deposits, concessional swap facilities for external commercial borrowings, and tax benefits for foreign investors in government securities. Goldman Sachs estimates these measures could attract approximately $60 billion in additional capital inflows by 2026.
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