The investment bank’s update on the economy is based upon the US-Iran peace treaty and increased softening of crude prices.
Goldman Sachs has raised its calendar year 2026 real GDP growth forecast for India by 30 basis points to 6.8%, and its FY27 estimate by 40 basis points to 6.5%, pointing to falling crude oil prices as the main trigger. The firm said the recent US-Iran peace deal has brightened India’s growth outlook by removing the risk of further fuel-price pass-through to consumers, even as easing supply constraints were already helping investment indicators recover in May from their March-April lows.
The upgrade comes weeks after the RBI’s Monetary Policy Committee moved in the opposite direction on June 5, cutting its own growth projection from 6.9% to 6.6% while raising its inflation forecast to 5.1%.
Inflation Outlook Softens
In terms of inflation expectations, August Brent Crude Futures were down $72.83 per barrel on a settlement of up -3.2% on Friday. Goldman Sachs anticipates that the fuel price increases already announced will continue to provide inflationary pressures in the near term due to their pass through effect to the final price of goods, but now that there is less potential for additional hikes to occur; inflation pressure from a loss of goods has also been reduced as a result of the drop in the Petrochemical Index. Global Urea market corrections have had a direct effect on lowering the forecast of inflation on core goods for CY26 and FY27 by 30-50 BP to 3.2% and 4.1%, respectively.
Consumption and Fiscal Relief
Goldman Sachs believes that weak consumer demand along with weak consumer confidence is expected to continue to impact growth in consumption through the second and third quarters due to prior fuel price increases; however, Q4 is expected to recover due to no additional risk of further fuel price increases. The decline in global urea prices is also expected to relieve pressure on the government’s fertiliser subsidy bill.
Goldman Sachs believes that India’s economy has exhibited resilience to the West Asia shock through the fiscal measures taken that offset a majority of the increase in energy costs and reduced the impact to consumers.
