According to a recent Goldman Sachs analysis, growing uncertainty around global tariffs may cause India's private sector capital expenditure (capex) to lag in the near future.

According to the reports, businesses in the capital goods and infrastructure sectors run the danger of seeing a decline in order inflow as a result of these delays in new capital expenditure choices.

With the exception of the Global Financial Crisis (GFC) in 2008 and the COVID-19 epidemic, India's GDP growth has generally remained resilient to global shocks; however, the effects on particular industries, such as ports and exports, have been more obvious.

India's merchandise exports make up only about 12 percent of its GDP, according to the report, whereas China's and Vietnam's share is 19 percent and 82 percent, respectively.

Nonetheless, a slowdown in US GDP growth has traditionally had some impact on India's export momentum because the US is a significant trading partner, making for 17.7 percent of India's exports and 6.2 percent of its imports in FY24.

These days, port activity is also seeing this influence. According to the research, after a brief frontloading of trade, container traffic and overall port volumes would decelerate significantly in FY26 and FY27.

Given the uncertainties surrounding tariffs and the weak global demand, importers are anticipated to exercise caution when placing new orders.

 

A slowdown in the rise of government capital expenditures is contributing to the strain. India's gross fixed capital formation (GFCF) increased respectably over the past three years, mostly due to investments made by the public sector. However, this pace is probably going to slow down as global uncertainty increases and the public and private sectors adopt a more cautious approach.

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According to Goldman Sachs, this climate can have an impact on the order books of infrastructure and capital goods firms, which mostly depend on robust capital expenditure trends.