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GDP and Consumption Outlook

  • GDP and Consumption Outlook
  • Monetary Policy and the Yield Curve
  • Capital Expenditure (Capex)
  • Fiscal Policy and Budget
  • External Sector and Rupee
  • Growth Projections and Risks

On this page

  • GDP and Consumption Outlook
  • Monetary Policy and the Yield Curve
  • Capital Expenditure (Capex)
  • Fiscal Policy and Budget
  • External Sector and Rupee
  • Growth Projections and Risks
CNBC/January 9, 2026/3 min read

Don't Expect BoPs To Be Negative For 3rd Consecutive Year: Santanu Sengupta Of Goldman Sachs

Watch on YouTube ↗

This interview with Santanu Sengupta, Chief India Economist at Goldman Sachs, explores India's economic outlook for 2026 and FY27. Despite mixed signals from the Ministry of Statistics and Programme Implementation (MOSPI) regarding slowing consumption, Sengupta maintains a positive stance on a recovery driven by monetary easing and fiscal support.


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Reading

Published
January 9, 2026
Read time
3 min read
Progress0%
MetricPrediction
FY27 Real GDP Growth6.8%
CY26 Real GDP Growth6.7%
USD/INR (3 Months)₹89.50
USD/INR (6-12 Months)91
Current Account Deficit~1% of GDP
FY27 Fiscal Deficit~4.0% - 4.2%

GDP and Consumption Outlook

  • Current GDP Trends: MOSPI projects current year GDP at 7.4%, but data indicates consumption growth is slowing to 6.6% in the second half of the year [00:16], [01:13].
  • Segmented Recovery: Sengupta distinguishes between the "bottom end" and "top end" of the consumption pyramid. He is confident about the bottom end due to GST rate cuts and state-level fiscal transfers [02:04].
  • Deleveraging: The top-end consumer, previously overleveraged, has used income tax cuts and interest rate reductions for deleveraging rather than immediate spending. This is expected to seed a credit growth revival by the second half of 2026 [03:36].
  • Real Estate: Residential housing sales (in million square feet) were reported down 2% compared to the previous year, highlighting current consumption sluggishness [03:02].

Monetary Policy and the Yield Curve

  • RBI Easing: The RBI has implemented 125 basis points of rate cuts and injected liquidity worth 3% of GDP [01:42].
  • Yield Disconnect: While the 1-year T-bill yield dropped to 5.47% (from 6.5% a year ago), long-term yields have remained high. The 10-year yield is at 6.62% (down only 15 bps), and 15-year yields are actually higher than before the rate cuts [04:46].
  • Supply Pressures: The steepness of the yield curve—with a 200 basis point spread between the repo rate and 30-year bonds—is attributed to frontloaded state bond issuances and reduced buying from pension/insurance funds [06:16].

Capital Expenditure (Capex)

  • Shift to Private Sector: After public capex led the front-loading in recent years, a broad-based private capex revival is not yet evident. Instead, it is sector-specific, focusing on power (renewable and conventional), electronics, and defense [07:51].
  • Public Capex: Public capex is unlikely to rise significantly from current levels as the government manages its fiscal space [07:26].

Fiscal Policy and Budget

  • Consolidation Pace: The government consolidated the fiscal deficit by 80 basis points in each of the previous two years (total 1.6%). However, this year’s consolidation was only 40 basis points [08:10].
  • Deficit Targets: Goldman Sachs expects the government to target a fiscal deficit of 4% to 4.2% in the upcoming budget to avoid a severe "fiscal drag" on the economy, rather than pushing for a sub-4% target [08:28].

External Sector and Rupee

  • Balance of Payments (BOP): India has faced a BOP deficit for two consecutive years, a rarity since 1991 [09:01]. Sengupta does not expect a third consecutive negative year, as valuation adjustments make the rupee more attractive to long-term investors [10:01].
  • Rupee Valuation: The Indian Rupee (INR) was overvalued at the start of last year on a trade-weighted basis (REER), making the recent depreciation an "appropriate adjustment" [09:34].

Growth Projections and Risks

  • Forecast: Goldman Sachs projects a growth rate in the "late 6%" range (specifically cited as 6.8%) for the coming year [10:21], [10:35].
  • Downside Risks: The primary risk to this outlook is a significant increase in U.S. tariffs under the Trump administration. Without a sharp "crank up" in tariffs, the risks to the 6.8% target remain balanced [10:49].

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