Goldman Sachs and EY on Friday expressed optimism about the Indian economy, driven by the easing of the West Asia crisis and lower energy prices, according to reports from Business Today. The positive outlook supports growth, reduces inflationary pressure, and helps rein in the fertiliser subsidy, which was seen to be double the budgeted level.
Goldman Sachs Raises GDP Forecast
Goldman Sachs’ economics research team raised its real GDP growth forecast for calendar year 2026 by 0.3 percentage points to 6.8% year-on-year. The firm also lowered its headline inflation forecast by 0.2 percentage points to 4.4% year-on-year and trimmed its current account deficit forecast by 0.2 percentage points to 1.1% of GDP.
“With the recent downward revision in the oil price forecast… we raise our real GDP growth forecast for CY2026 by 0.3pp to 6.8% Y-o-Y, lower our headline inflation forecast by 0.2pp to 4.4% Y-o-Y and lower our current account deficit forecast by 0.2pp to 1.1% of GDP,” the Goldman Sachs note said, according to Business Today.
EY Projects 6.6-6.8% Growth for 2026-27
EY pegged GDP growth for the fiscal year 2026-27 at 6.6-6.8%. “Considering the recent geopolitical developments, if global crude prices settle at relatively lower levels and shipments through the Strait of Hormuz normalise, the positive momentum of India’s growth prospects is likely to be restored,” EY said, as reported by Business Today.
EY estimated that the Centre’s fiscal deficit will be around 4.4% of GDP, slightly above the budgeted level of 4.3%. Inflation is projected at around 4.5%.
Impact of Lower Crude on Consumption and Prices
Goldman Sachs noted that consumption will take a hit in the June and September quarters due to oil price hikes implemented earlier. “Lower crude oil prices have also been accompanied by a decline in petrochemical product prices. Although the earlier increases in polymer prices are still likely to lift core goods inflation in the near term, we now expect the impact to be limited (vs. our earlier expectations), with a lower likelihood of incremental price increases across the core goods basket,” the firm said, according to Business Today.
Comparison of Forecasts
The table below summarises the key forecasts from Goldman Sachs and EY:
| Indicator | Goldman Sachs (CY2026) | EY (FY2026-27) |
|---|---|---|
| Real GDP growth | 6.8% (+0.3pp revision) | 6.6-6.8% |
| Headline inflation | 4.4% (-0.2pp revision) | ~4.5% |
| Current account deficit | 1.1% of GDP (-0.2pp revision) | Not specified |
| Fiscal deficit | Not specified | ~4.4% of GDP (budget: 4.3%) |
Background
Several agencies, including the Reserve Bank of India (RBI), had previously lowered their growth projections due to the war in West Asia, which disrupted supplies, exerted price pressure, and strained the Centre’s fiscal health, hurting consumption. The latest upgrades reflect the impact of easing geopolitical tensions and declining energy costs.
Next Milestone
The Reserve Bank of India’s next monetary policy meeting will be closely watched for further adjustments to growth and inflation forecasts in light of these developments.
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