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Informist, Saturday, Jun. 27, 2026

NEW DELHI – Goldman Sachs has raised its forecast for India's GDP growth for the current financial year after an interim peace deal between the US and Iran pushed crude oil prices sharply lower. Economists at Goldman Sachs also lowered their inflation forecast for the country with lower crude oil prices removing the risk of further increases in retail petrol and diesel prices.

India's GDP is seen growing 6.5% in FY27, 40 basis points higher than previously projected, Goldman Sachs said in a report. For 2026, the GDP growth forecast has been raised by 30 bps to 6.8%.

Even after the upward revision, however, Goldman's growth forecast for FY27 is lower than the Reserve Bank of India's projection of 6.6%. The Indian economy expanded 7.7% in FY26 and 7.8% in the March quarter. The latter was 50 bps higher than Goldman's forecast.

"We expect the impact of earlier fuel price hikes to weigh primarily on Q2 (Apr-Jun) consumption, with some spillover into Q3 (Jul-Sept) as households adjust to higher fuel costs," Goldman Sachs economists Santanu Sengupta and Arjun Varma said in the report. "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 (Oct-Dec)."

INFLATION, POLICY

Goldman Sachs lowered its headline inflation forecast for FY27 by 30 bps to 4.9%, and for 2026 by 20 bps to 4.4%. CPI inflation was 3.93% in May and the RBI projects inflation to average 5.1% in FY27.

"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," Sengupta and Varma said. Goldman Sachs also expects core inflation to average 4.5% in FY27, 20 bps lower than previously projected.

Goldman continues to expect a cumulative 50 bps of repo rate hikes in 2026, split across the October and December meetings of the Monetary Policy Committee. The RBI's rate-setting panel earlier this month left the repo rate at 5.25%. "If the recent correction in petrochemical prices persists then manufacturers may face less pressure to raise prices. In such a scenario, there is a risk that the RBI may defer the policy tightening cycle," Sengupta and Varma noted. RBI Governor Sanjay Malhotra Wednesday said it is premature to talk about repo rate hikes in the coming months.

The sharp correction in global urea prices should reduce upside risk to the fertiliser subsidy bill, which, together with lower oil prices, should help ease near-term fiscal pressures, Sengupta and Varma said in the report. 

Goldman Sachs also lowered its current account deficit projection by 20 bps to 1.1% of GDP for 2026. According to Sengupta and Varma, the slew of capital flow measures announced by the RBI in the June monetary policy meeting will help stem depreciation in the rupee against the dollar.  End

US$1 = INR 94.40

Reported by Shubham Rana

Edited by Rajeev Pai

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