Tariff uncertainties likely to slow down India’s private sector capex

India’s private and public capex is likely to slow down amid ongoing global tariff uncertainties, leading companies to postpone investment plans, reveals a recent report by Goldman Sachs. Export and port activities are declining, especially due to close trade links with the U.S. Despite steady GDP growth, sectors like exports and ports are experiencing growing pressure, Goldman Sachs observed.

According to a recent Goldman Sachs report, India’s private sector capital expenditure (capex) may slow down in the near term due to rising uncertainty over global tariffs. With tariff rates yet to be finalized and expected to remain volatile in the coming months, businesses are likely to postpone investments in new projects. 

The report stated, “We think capital expenditure in the private sector will take a back seat or get pushed out given the recent developments around tariffs. As tariff rates get negotiated and firmed up over the next few months, corporations planning new capex may defer.”

Although India’s overall GDP growth has shown resilience against global shocks—except during the 2008 Global Financial Crisis and the COVID-19 pandemic—certain sectors, particularly exports and ports, are showing signs of vulnerability.

India’s merchandise exports constitute around 12% of its GDP, relatively low compared to China’s 19% and Vietnam’s 82%. However, India’s trade is closely linked to the US, which accounted for 17.7% of India’s exports and 6.2% of imports in FY24. 

Historically, a slowdown in the US economy has had a direct impact on India’s export performance. This link is now evident in the country’s port activity, with Goldman Sachs forecasting a slowdown in container traffic and overall port volumes during FY26 and FY27. This follows a temporary boost from frontloaded trade activity, as importers remain cautious due to global demand weakness and trade policy uncertainty.

The report also notes a softening in government-led capex growth. Over the past three years, India has seen significant public investment, leading to healthy growth in gross fixed capital formation (GFCF). However, with growing global economic uncertainty, both public and private sectors are expected to adopt a more conservative approach, dampening future capex growth. This cautious environment could adversely affect capital goods and infrastructure companies that heavily depend on robust investment cycles, the report noted.