Goldman Sachs hikes India’s GDP growth forecast

The firm said lower crude oil prices have also been accompanied by a decline in petrochemical product prices.

Global investment and financial services firm Goldman Sachs has raised its calendar year 2026 real GDP growth forecast for India by 30 basis points to 6.8% and FY27 forecast by 40 bps to 6.5% in the wake of the fall in crude oil prices.

The recent US-Iran peace deal should improve India’s growth outlook — lower oil prices have taken out the risk of additional fuel pass-through to consumers, while easing supply constraints were already beginning to support a recovery in investment related indicators in May from their March-April troughs, the firm said in a report.

On June 5, the RBI’s Monetary Policy Committee lowered the growth projection from 6.9% to 6.6% and hiked the inflation forecast from 4.6% to 5.1%.

International benchmark Brent crude futures for August were 3.2% lower at $72.83 a barrel on Friday.

“While the fuel price hikes already announced will continue to feed through into inflation over the coming months, the lower oil price path suggests that the risk of additional pass-through has diminished materially,” Goldman Sachs said.

The firm said lower crude oil prices have also been accompanied by a decline in petrochemical product prices.

“Although the earlier increases in polymer price 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,” it said.

Reflecting the lower oil price assumptions and reduced manufactured goods inflation pressures, Goldman Sachs lowered its core goods inflation forecast for CY26 and FY27 by 30 basis points and 50 bps each to 3.2% and 4.1% respectively.

“Going forward, we expect consumption growth to moderate in Q2 and Q3 on earlier pump fuel price increases. We have also seen deterioration in the RBI’s urban and rural consumer confidence surveys (90.7 in May vs. 93.2 in April for the urban confidence index),” Goldman Sachs said.

However, the recent decline in oil prices reduces the likelihood of further fuel price increases, implying no further incremental drag on consumption growth from Q4, it said.

Further, the sharp correction in global urea prices is likely to limit the increase in the government’s fertilizer subsidy bill relative to our earlier expectations.

“Recent import tenders have cleared at substantially lower prices than those seen at the peak of the Middle East conflict, prompting the government to indicate that the FY27 fertilizer subsidy requirement could be reassessed. Together with lower oil prices, this should help alleviate near-term fiscal pressures,” it said.

Goldman Sachs said the Indian economy remained resilient through the West-Asia shock, as fiscal and quasi-fiscal measures absorbed much of the increase in energy costs and limited pass-through to consumers. As a result, consumption held up in March and April, even as investment somewhat softened amid supply disruptions and commercial LPG allocations remained around 70 per cent of pre-conflict levels, it said.

George Mathew is an Associate Editor with The Indian Express, based in Mumbai. A veteran of financial journalism with nearly three decades of experience, he is one of the country’s most authoritative voices on banking, regulation, and the corporate sector. Expertise & Focus Areas Mathew’s reporting covers the nerve center of India’s economy. His specialized beats include: The Reserve Bank of India (RBI): He has tracked the central bank's policy evolution through the tenures of multiple Governors, offering deep insights into monetary policy, repo rates, and banking regulation. Banking & Insurance: Extensive coverage of public and private sector banks, non-performing assets (NPAs), and key legislative reforms like the Insurance Amendment Bills. Corporate Affairs: Mathew frequently breaks major stories related to India's largest conglomerates, with a specific focus on the Tata Group, documenting boardroom shifts and strategic decisions. Financial Markets: Reporting on the complexities of Foreign Portfolio Investors (FPIs), IPOs, and currency fluctuations. Authoritativeness & Insight With a career dating back to the late 1990s, Mathew possesses a rare institutional memory of India’s financial liberalization and market crises. His work is not limited to daily news; he frequently contributes to the "Explained" section, where he decodes complex financial legislations and market trends for a broader audience. His rigorous reporting has also been featured in scholarly platforms like the Economic and Political Weekly (EPW). Find all stories by George Mathew here ... Read More

Global investment and financial services firm Goldman Sachs has raised its calendar year 2026 real GDP growth forecast for India by 30 basis points to 6.8% and FY27 forecast by 40 bps to 6.5% in the wake of the fall in crude oil prices.

The recent US-Iran peace deal should improve India’s growth outlook — lower oil prices have taken out the risk of additional fuel pass-through to consumers, while easing supply constraints were already beginning to support a recovery in investment related indicators in May from their March-April troughs, the firm said in a report.

On June 5, the RBI’s Monetary Policy Committee lowered the growth projection from 6.9% to 6.6% and hiked the inflation forecast from 4.6% to 5.1%.

International benchmark Brent crude futures for August were 3.2% lower at $72.83 a barrel on Friday.

“While the fuel price hikes already announced will continue to feed through into inflation over the coming months, the lower oil price path suggests that the risk of additional pass-through has diminished materially,” Goldman Sachs said.

The firm said lower crude oil prices have also been accompanied by a decline in petrochemical product prices.

“Although the earlier increases in polymer price 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,” it said.

Reflecting the lower oil price assumptions and reduced manufactured goods inflation pressures, Goldman Sachs lowered its core goods inflation forecast for CY26 and FY27 by 30 basis points and 50 bps each to 3.2% and 4.1% respectively.

“Going forward, we expect consumption growth to moderate in Q2 and Q3 on earlier pump fuel price increases. We have also seen deterioration in the RBI’s urban and rural consumer confidence surveys (90.7 in May vs. 93.2 in April for the urban confidence index),” Goldman Sachs said.

However, the recent decline in oil prices reduces the likelihood of further fuel price increases, implying no further incremental drag on consumption growth from Q4, it said.

Further, the sharp correction in global urea prices is likely to limit the increase in the government’s fertilizer subsidy bill relative to our earlier expectations.

“Recent import tenders have cleared at substantially lower prices than those seen at the peak of the Middle East conflict, prompting the government to indicate that the FY27 fertilizer subsidy requirement could be reassessed. Together with lower oil prices, this should help alleviate near-term fiscal pressures,” it said.

Goldman Sachs said the Indian economy remained resilient through the West-Asia shock, as fiscal and quasi-fiscal measures absorbed much of the increase in energy costs and limited pass-through to consumers. As a result, consumption held up in March and April, even as investment somewhat softened amid supply disruptions and commercial LPG allocations remained around 70 per cent of pre-conflict levels, it said.