Goldman Sachs raises India's growth forecast to 6.8%
What's the story
Goldman Sachs has raised its real GDP growth forecast for India to 6.8% for the calendar year 2026, up from its previous estimate of 6.5%. The revision comes on the back of lower oil prices, easing supply disruptions, and resilient domestic demand following the US-Iran peace deal. The investment bank also revised its FY27 GDP growth estimate upward by 40 basis points to 6.5%.
Economic impact
US-Iran deal improves India's macroeconomic outlook
Goldman Sachs noted that the US-Iran peace deal has significantly reduced risks to India's macroeconomic outlook. The agreement has led to a correction in global crude prices and eased supply constraints, thus supporting economic activity. "The recent US-Iran peace deal should improve India's growth outlook," wrote Goldman economists Santanu Sengupta and Arjun Varma, adding that lower oil prices have "taken out the risk of additional fuel pass-through to consumers."
Growth drivers
Q1 CY26 real GDP growth forecast revised to 7.8% YoY
Goldman Sachs's forecast for India's real GDP growth in Q1 CY26 stands at 7.8% year-onyear (YoY), beating its earlier estimate by about 50 basis points. The bank attributed this increase to stronger investment and services activity. It also observed a recovery in port cargo traffic in May, hitting a four-month high as supply bottlenecks eased from their March-April lows.
Future outlook
Investment and consumption trends
Goldman Sachs expects consumption growth to moderate in Q2 and Q3 2026 as households adjust to earlier pump price hikes. However, from Q4 onwards, it doesn't foresee any "incremental drag on consumption," owing to lower oil prices limiting the need for further retail fuel price hikes. On the investment front, gross fixed capital formation hit a six-quarter high of 10.8% YoY in Q1 CY26, driven by robust auto production and stronger imports of capital goods.
Fiscal relief
Easing fiscal pressures and inflation expectations
The peace-driven correction in commodity markets is also easing fiscal pressures. A sharp fall in global urea prices and lower crude benchmarks are likely to reduce upside risk to the fertilizer subsidy bill, "help alleviate near-term fiscal pressures," Goldman Sachs said. The investment bank has lowered its headline CPI inflation forecast for CY26 by 20 basis points to 4.4% YoY and for FY27 by 30 basis points to 4.9%.