The investment bank noted that India remained resilient despite the impact of Middle East tensions, with government measures helping reduce the impact of higher energy costs.
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India’s economic outlook for the calendar year 2026 has received an upgrade from Goldman Sachs, with the global investment bank raising its growth forecast while lowering inflation and current account deficit estimates after easing crude oil prices following the recent US-Iran peace deal. In its latest report titled India: Improved macro outlook after the US-Iran deal, Goldman Sachs said the decline in oil prices has reduced risks for the Indian economy and improved the overall macroeconomic outlook.
Goldman Sachs has raised India’s real GDP growth forecast for CY26 by 0.3 percentage points to 6.8 per cent year-on-year, while cutting its headline inflation forecast by 0.2 percentage points to 4.4 per cent and reducing its current account deficit estimate by 0.2 percentage points to 1.1 per cent of GDP.
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“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% yoy, lower our headline inflation forecast by 0.2pp to 4.4% yoy and lower our current account deficit forecast by 0.2pp to 1.1% of GDP,” the report said.
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The investment bank noted that India remained resilient despite the impact of Middle East tensions, with government measures helping reduce the impact of higher energy costs.
“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.
Goldman Sachs said stronger-than-expected economic activity in the first quarter of CY26 and softer crude prices supported the upward revision.
India’s real GDP growth in the first quarter stood at 7.8 per cent year-on-year, backed by investment and services activity.
The brokerage expects consumption growth to moderate in the second and third quarters due to earlier fuel price increases, but said lower oil prices have reduced the possibility of further retail fuel price hikes.
It also said softer global commodity prices could ease fiscal pressure.
“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,” it said.
Goldman Sachs said lower oil prices and stronger remittance inflows have strengthened India’s external position.
“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 expects a balance of payments surplus of 0.7 per cent of GDP for the year.
However, the brokerage cautioned that weather-related uncertainties and the impact of earlier fuel price increases could remain short-term challenges before growth gains further momentum later in the year.
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