Goldman Sachs raised India's 2026 GDP forecast to 6.8% and cut inflation and CAD projections, citing lower oil after the US-Iran deal. Weather and fuel pass-through remain consumption risks.
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Goldman Sachs raised its India real GDP growth forecast for 2026 to 6.8% from 6.5%, pointing to the sharp decline in crude oil prices after the US-Iran peace deal and stronger-than-expected activity in the first quarter.
The global investment bank also cut its headline inflation projection by 0.2 percentage point to 4.4% and lowered its current account deficit estimate by the same amount to 1.1% of GDP, according to a report titled “India: Improved macro outlook after the US-Iran deal.”
“On balance, with the recent downward revision in the oil price forecast by our commodities team ($82/bbl average in Q3–Q4 CY26, vs. $92/bbl earlier and $75/bbl average in CY27, vs. $80/bbl earlier), we raise our real GDP growth forecast for CY26 by 0.3pp to 6.8% y-o-y,” the report said.
The Indian economy held up through the Middle East disruption because government fiscal and quasi-fiscal measures absorbed much of the energy cost increase and limited pass-through to consumers, Goldman Sachs noted. First-quarter real GDP growth came in at 7.8% year-on-year, supported by resilient investment and strong services activity.
Consumption growth is likely to moderate in the second and third quarters because of the earlier fuel price increases. The decline in oil prices has reduced the need for further retail fuel price hikes, limiting additional pressure on household spending beyond the third quarter, the bank said.
The softer global commodity prices should also ease fiscal pressures. “The sharp correction in global urea prices should reduce upside risk to the fertilizer subsidy bill versus our earlier expectations. Together with lower oil prices, should help ease near-term fiscal pressures,” the report added.
On the external side, lower oil prices and stronger remittance inflows have improved India’s external sector outlook. Goldman Sachs now expects a balance of payments surplus of 0.7% of GDP for CY26.
Weather-related uncertainties and the impact of the earlier fuel price increases remain short-term headwinds for consumption before the economy gathers further momentum later in the year, the bank maintained.
For more on how lower oil prices affect global growth and rate expectations, see the crude oil profile.
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