Goldman Sachs has increased India’s GDP growth projection for 2026 to 6.8% from the previous 6.5% due to the US-Iran peace deal, which has led to lower global oil prices and reduced supply chain disruptions.
The investment bank has also raised its GDP growth forecast for India in FY27 by 40 basis points to 6.5%. This adjustment follows a significant drop in crude oil prices, which has mitigated risks to the Indian economy.
According to Goldman Sachs’ report titled ‘India: Improved macro outlook after the US-Iran deal,’ the revision in forecasts was driven by the decline in oil prices, resulting in a more favorable economic environment for India.
The report highlighted that the Indian economy demonstrated resilience during the Middle-East shock, with fiscal measures absorbing much of the energy cost increase and limiting its impact on consumers.
Goldman Sachs anticipates a moderation in consumption growth in the second and third quarters due to earlier fuel price hikes. However, the decrease in oil prices is expected to alleviate the need for additional retail fuel price increases, easing pressure on household spending.
The investment bank also mentioned that softer global commodity prices are likely to reduce the government subsidy bill on fertilizers and petroleum products, thereby easing fiscal pressures in the near term.
Lower crude oil prices have significantly reduced the risk of further increases in petrol and diesel prices, leading to lower projections for both core and headline inflation, as per Goldman Sachs.
Goldman Sachs acknowledged that weather-related uncertainties and the impact of previous fuel price hikes could pose short-term challenges to consumption, but it expects the economy to gain momentum later in the year.
