Goldman Sachs Upgrades India's CY26 GDP Growth Forecast to 6.8%
Goldman Sachs has revised India's macroeconomic outlook for calendar year 2026 upward, raising the real GDP growth forecast to 6.8% year-on-year from its previous estimate. The upgrade follows the recent US-Iran peace deal, which led to a sharp decline in crude oil prices, reducing key risks to the Indian economy. Alongside the growth revision, the global investment bank lowered its headline inflation forecast by 0.2 percentage points to 4.4% and cut its current account deficit (CAD) projection by 0.2 percentage points to 1.1% of GDP.
In its report titled "India: Improved macro outlook after the US-Iran deal," Goldman Sachs attributed the revision to lower oil price assumptions. The bank's commodities team now expects crude oil to average $82 per barrel in the third and fourth quarters of CY26, down from the earlier forecast of $92 per barrel, and $75 per barrel in CY27, compared to $80 per barrel previously.
Resilient Economy and Fiscal Measures Mitigate Middle East Shock
According to Goldman Sachs, India's economy demonstrated resilience despite disruptions from the Middle East conflict. Government fiscal and quasi-fiscal measures absorbed much of the increase in energy costs, limiting the pass-through to consumers. "The Indian economy remained resilient through the Middle-East shock, as fiscal and quasi-fiscal measures absorbed much of the increase in energy costs and limited pass-through to consumers," the report noted.
India's real GDP growth in the first quarter of CY26 came in at 7.8% year-on-year, supported by robust investment and strong services activity. This stronger-than-expected performance, combined with lower crude oil prices, prompted the upward revision in the growth outlook.
Consumption Growth Expected to Moderate Temporarily
Goldman Sachs expects consumption growth to moderate during the second and third quarters due to earlier increases in fuel prices. However, the decline in oil prices has significantly reduced the need for further retail fuel price hikes, limiting additional pressure on household spending beyond the third quarter. The bank believes that softer global commodity prices will 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 stated.
Inflation and External Sector Outlook Improve
On the inflation front, lower crude oil prices have substantially reduced the risk of further increases in petrol and diesel prices and eased pressure on petrochemical products. This has led to lower projections for both core and headline inflation. The report also highlighted improvements in India's external sector outlook due to lower oil prices and stronger remittance inflows. "Overall, we lower our current account deficit forecast for CY26 further by 0.2pp to 1.1% of GDP," Goldman Sachs said, adding that it now expects a balance of payments surplus of 0.7% of GDP for the year.
Short-Term Headwinds Remain, but Momentum Expected Later
The brokerage maintained that weather-related uncertainties and the impact of earlier fuel price increases could remain short-term headwinds for consumption before the economy gathers further momentum later in the year. Despite these temporary challenges, the overall macroeconomic outlook has improved significantly, supported by easing oil prices and resilient domestic economic activity.
