Goldman Sachs has turned more constructive on India's external sector outlook, saying the country's balance of payments (BoP) position remains stronger than suggested by the recent weakness in the rupee and projecting a BoP surplus in 2026 after two consecutive years of deficits.

In its latest report, "India: A More Favourable Balance of Payments Outlook", Goldman Sachs said, "The INR's recent weakness appears larger than what balance of payments (BoP) fundamentals would suggest."

The report noted that despite concerns over softer capital inflows and higher energy prices, India posted a BoP surplus of $7.2 billion in the first quarter of calendar year 2026.

According to Goldman Sachs, "India posted a current account surplus of $7.0bn in Q1 CY26 (vs. our expectation of a deficit)," supported by lower-than-expected oil imports, stronger remittances and robust services exports.

The global investment bank attributed the divergence between the rupee's performance and India's external fundamentals to heightened geopolitical uncertainty. It said, "the recent pressure on the currency was driven more by precautionary and speculative demand for dollars amid heightened geopolitical uncertainty than by a deterioration in India's fundamental external position."

Goldman Sachs highlighted that India's vulnerability to oil price shocks has declined over time. The report stated, "India's oil intensity has declined steadily over the past three decades, reflecting improvements in energy efficiency, greater electrification of transportation and a gradual shift towards less energy-intensive sources of growth."

It further observed that oil import volumes have become increasingly responsive to higher crude prices. The report estimated that with Brent crude averaging around $90 per barrel in 2026, "a 10 per cent price rise is associated with around a 6 per cent decline in net import volumes," helping offset part of the impact of higher oil prices on the trade balance.On gold imports, Goldman Sachs said policymakers have historically used import duties to manage external pressures.

The report noted that "higher import duties were typically followed by a decline in gold import volumes," with the impact beginning after a one-to-two-month lag and becoming fully visible over five to six months.Following stronger-than-expected external sector data, the investment bank revised its current account deficit forecast sharply lower.

It now expects India's current account deficit to narrow to $46 billion, or 1.3 per cent of GDP, in calendar year 2026, compared with its earlier estimate of $78 billion, or 2.0 per cent of GDP. "Taken together, we revise our current account deficit forecast for CY26 to $46bn (1.3 per cent of GDP), vs. $78bn (2.0 per cent of GDP earlier)," the report said.

Goldman Sachs also expects recent measures announced by the Reserve Bank of India (RBI) and the government to support foreign capital inflows. These include incentives for foreign currency non-resident deposits, concessional swap facilities for external commercial borrowings and tax benefits for foreign investors in government securities.

The report estimated "around $60bn of inflows from the various measures announced by the RBI to incentivize dollar flows in CY26." As a result, Goldman Sachs expects India to move back into a surplus position on the balance of payments. It said, "we expect India to record a balance of payments surplus of around 0.6 per cent of GDP in CY26 and FY27 each."

The report added that while the improved external position should ease depreciation pressures on the rupee, a sharp appreciation is unlikely because the RBI is expected to absorb much of the incoming foreign exchange through reserve accumulation.

"An improved balance of payments outlook should help lower depreciation pressures on the INR," Goldman Sachs said, while noting that "we do not expect a significant appreciation in the INR."

Overall, the report paints a more favourable picture of India's external accounts, supported by resilient remittances, strong services exports, lower oil intensity and policy measures aimed at attracting foreign capital.

The investment bank believes these factors will help India maintain a stronger balance of payments position despite global uncertainties.

Published on June 15, 2026