Goldman Sachs sees India BoP surplus in 2026 after CAD cut

Why Goldman Sachs turned more constructive

Goldman Sachs has turned more constructive on India’s external sector outlook, arguing that the balance of payments (BoP) position is stronger than what recent weakness in the rupee appears to indicate. In its note titled India: More Fable Balance Payments Outlook, the bank said the recent decline of the Indian rupee “seems to exceed what BoP fundamentals would imply”. The shift matters because BoP trends influence currency stability, foreign exchange reserves, and the overall ability of the economy to finance imports and overseas obligations. The bank’s view comes amid market focus on the twin pressures of softer capital inflows and higher energy prices. Even with these concerns, Goldman’s base case points to a return to a BoP surplus in 2026 after two consecutive years of deficits. The report frames India’s external accounts as being supported by resilient remittances, strong services exports, and a lower oil intensity. It also flags policy measures aimed at attracting foreign capital as a key support.

Q1 2026 data that changed the narrative

Goldman highlighted that India posted a BoP surplus of USD 7.2 billion in the first quarter of calendar year 2026 (Q1 CY26). Alongside this, it said India recorded a current account surplus of USD 7.0 billion in Q1 CY26, which it described as being versus its own expectation of a deficit. The bank attributed the upside to lower-than-expected oil imports, stronger remittances, and robust services exports. These factors collectively helped improve the near-term external balance despite concerns about energy prices and capital flows. The Q1 outcome is central to Goldman’s argument that the rupee’s depreciation may not align with underlying external-sector fundamentals. It also provided the basis for a material revision to the bank’s forward estimates for the current account. The report’s tone suggests that the external picture has more buffers than the currency move alone would imply.

Current account deficit forecast revised sharply lower

Following the stronger external sector data, Goldman Sachs revised its current account deficit (CAD) forecast for calendar year 2026. It now expects India’s CAD to narrow to USD 46 billion, or 1.3% of GDP, in CY26. This compares with its earlier estimate of USD 78 billion, or 2.0% of GDP. Goldman summarised this change by stating it revised its CAD forecast for CY26 to USD 46 billion (1.3% of GDP) versus USD 78 billion (2.0% earlier). The scale of the revision reflects how sensitive the CAD is to movements in oil imports, remittances, and services exports. It also underscores that quarterly surprises can meaningfully reshape full-year balance estimates. By bringing the CAD estimate down, the bank effectively improved its view on India’s external financing requirement in 2026.

BoP expected to return to surplus in 2026 and FY27

On the back of the lower CAD estimate, Goldman expects India to move back into a surplus position on the balance of payments. The bank said it expects India to record a BoP surplus of around 0.6% of GDP in CY26 and FY27 each. This is a notable call because it comes after what the report described as two consecutive years of BoP deficits. Goldman’s framing also addresses a key investor concern: whether India’s external accounts can remain stable during periods of currency weakness. By projecting a BoP surplus, the bank implies that overall external flows could be sufficient to cover the current account gap and other external requirements in its forecast scenario. It also suggests that the rupee’s recent move may be out of step with these projected flows, based on the bank’s assessment.

RBI measures and the inflows estimate

Goldman’s report also referenced measures announced by the Reserve Bank of India (RBI) to encourage dollar flows. It estimated approximately USD 60 billion of inflows resulting from various RBI measures aimed at attracting dollar inflows in CY26. While the note does not detail each measure in the provided text, the headline estimate is important because it directly links policy actions to external financing conditions. Such inflows can support the capital account and reduce pressure on reserves if the current account is in deficit. In Goldman’s broader narrative, policy support is a reinforcing factor alongside structural strengths like remittances and services exports. The presence of a quantified inflows estimate also signals that Goldman is not relying only on qualitative arguments for its improved external outlook.

A wider set of Goldman projections also in circulation

Separate Goldman Sachs assessments mentioned in the provided material point to a more cautious macro view under different assumptions. One note said Goldman lowered India’s GDP growth forecast for 2026 to 5.9%, down from 6.5%, citing global uncertainties, geopolitical tensions, and supply disruptions. Another line in the same set of updates said Goldman forecast India’s economy would grow 5.9% in CY26 versus its pre-Iran war forecast of 7%. That set of commentary also said the bank added that India’s CAD could widen to 2% of GDP in 2026, while noting India’s CAD stood at 1.3% of GDP in the October-December 2025 period. It also stated inflation is expected to climb to 4.6% in 2026, nearing the upper end of the RBI’s target band, worsened by the rupee’s weakness and higher import costs.

Trade deal-driven revisions: higher growth, lower CAD

Another update cited a different trigger: an India-US trade deal and lower US tariffs on Indian exports. In that assessment, Goldman Sachs said it raised its forecast for India’s real GDP growth in CY26 by 20 basis points to 6.9% year-on-year. On the external front, it said it lowered its CAD forecast by around 0.25% of GDP to 0.8% of GDP in CY26 after the US tariff reduction announcement. The note also said pressure on the Indian rupee had eased since the trade announcement. Taken together with the BoP-focused note, the combined set of reports highlights how Goldman’s projections can shift as assumptions change, including energy conditions and trade policy developments.

What other indicators show about India’s external balances

The broader dataset in the provided material includes mixed signals on India’s current account over recent quarters. One set of estimates said India’s CAD widened to around 2.8% of GDP in Q4 2025 as exports to the US dipped and gold imports surged, though it also said the full-year 2025 CAD was likely to remain contained at 0.7% of GDP due to high remittances and a services trade surplus. Another update said India’s CAD widened sequentially to USD 12.3 billion (1.3% of GDP) in Q2 FY26, while noting net services exports increased 14% year-on-year and remittances climbed to USD 36-39 billion. That same update said the capital account surplus moderated to USD 0.6 billion (0.1% of GDP) from USD 8 billion in the previous quarter and RBI foreign exchange reserves saw a drawdown of USD 10.9 billion during the quarter on a BoP basis.

Key numbers at a glance

Additional datapoints mentioned in the same set of reports

Market impact and why the external balance matters

Goldman’s core point is that external sector fundamentals can look better than the currency’s short-term move suggests, particularly when services exports and remittances remain strong. A lower CAD forecast, if realised, reduces the size of external financing required through capital flows. The expectation of a BoP surplus of around 0.6% of GDP in CY26 and FY27, as stated by Goldman, implies that aggregate flows could be supportive even with volatility in specific channels. The mention of roughly USD 60 billion of inflows tied to RBI measures shows how policy can influence the external balance in a measurable way. At the same time, the surrounding data in the provided reports highlights real sources of volatility, including swings in gold imports and capital account outcomes. The quarter with a USD 10.9 billion reserves drawdown on a BoP basis illustrates how quickly conditions can tighten when inflows moderate. For investors, these figures help explain why the rupee can weaken even when some components of the external account look resilient.

Conclusion

Goldman Sachs’ BoP-focused note presents a more favourable reading of India’s external accounts, anchored by a Q1 CY26 BoP surplus of USD 7.2 billion and a sharper reduction in its CY26 CAD forecast to USD 46 billion (1.3% of GDP). The bank also expects a BoP surplus of around 0.6% of GDP in both CY26 and FY27 and estimates roughly USD 60 billion of inflows from RBI measures in CY26. Other Goldman updates referenced alongside the note show how growth, inflation, and CAD expectations can change under different global and policy scenarios, including energy shocks and trade developments. The next key signals for markets will come from subsequent quarterly BoP and current account prints and any follow-through on measures intended to support dollar inflows.