Goldman Sachs has raised India's GDP growth forecast for calendar year 2026 to 6.8% from 6.5%, following the US-Iran peace deal that has led to lower global oil prices and eased supply chain disruptions, according to a report titled 'India: Improved macro outlook after the US-Iran deal'. The investment bank also raised its FY27 GDP growth forecast by 40 basis points to 6.5%.
Forecast Revision Details
The revision comes after a sharp decline in crude oil prices reduced risks to the Indian economy. Goldman Sachs also lowered its headline inflation forecast by 0.2 percentage points to 4.4% year-on-year and its current account deficit forecast by 0.2 percentage points to 1.1% of GDP. The bank now expects a balance of payments surplus of 0.7% of GDP for the year.
| Metric | Previous Forecast | Revised Forecast | Change |
|---|---|---|---|
| CY26 GDP growth | 6.5% | 6.8% | +0.3 pp |
| FY27 GDP growth | 6.1% (implied) | 6.5% | +0.4 pp |
| Headline inflation | 4.6% | 4.4% | -0.2 pp |
| Current account deficit (% of GDP) | 1.3% | 1.1% | -0.2 pp |
| Balance of payments surplus (% of GDP) | - | 0.7% | - |
Rationale Behind the Upgrade
According to Goldman Sachs, stronger-than-expected economic activity in the first quarter of CY26 prompted the upward revision. India's real GDP growth in Q1 CY26 came in at 7.8% year-on-year, supported by resilient investment and robust services activity. The investment bank noted that while consumption growth is expected to moderate during the second and third quarters due to earlier increases in fuel prices, 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 US-Iran peace deal, which lowered global oil prices and eased supply chain disruptions, was a key external factor. Lower crude oil prices have substantially reduced the risk of further increases in petrol and diesel prices and eased pressure on petrochemical products, leading to lower projections for both core and headline inflation.
Inflation and External Sector Outlook
Goldman Sachs lowered its headline inflation forecast to 4.4% YoY, a reduction of 0.2 percentage points. The report stated that lower crude oil prices have reduced upside risks to inflation. Additionally, lower oil prices and stronger remittance inflows have improved India's external sector outlook, reflected in the lower current account deficit forecast and the expected balance of payments surplus.
Outlook and Risks
While the overall macro outlook has improved, Goldman Sachs maintained that weather-related uncertainties and the impact of earlier fuel price increases could remain short-term headwinds for consumption. However, the economy is expected to gather further momentum later in the year as the benefits of lower oil prices filter through. The investment bank's revised forecasts provide a more favourable backdrop for corporate planning and investment decisions in India, particularly for sectors sensitive to fuel costs and inflation.
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