Daijiworld Media Network - New Delhi
New Delhi, Jun 26: Goldman Sachs has upgraded its outlook for the Indian economy, raising its GDP growth forecast for calendar year 2026 to 6.8 per cent from the earlier estimate of 6.5 per cent, citing lower global crude oil prices and an improved macroeconomic environment following the US-Iran peace agreement.
The global investment bank has also revised its FY2026-27 (FY27) growth projection upward by 40 basis points to 6.5 per cent.
In its latest report, India: Improved Macro Outlook After the US-Iran Deal, Goldman Sachs said the easing of geopolitical tensions in the Middle East and the resulting fall in oil prices have significantly reduced risks to India's economic outlook.
Alongside the growth upgrade, the investment bank lowered its headline inflation forecast by 0.2 percentage points to 4.4 per cent year-on-year. It also trimmed its current account deficit projection by the same margin to 1.1 per cent of GDP and now expects India to post a balance of payments surplus equivalent to 0.7 per cent of GDP.
According to the report, the Indian economy remained resilient despite the recent geopolitical tensions in the Middle East, as fiscal and quasi-fiscal measures helped cushion the impact of higher energy costs and limited the burden on consumers.
Goldman Sachs attributed the improved growth outlook to stronger-than-expected economic activity during the first quarter of calendar year 2026 and the sharp correction in international crude oil prices. India's real GDP expanded by 7.8 per cent year-on-year in the first quarter, driven by robust investment activity and sustained growth in the services sector.
The report noted that while household consumption could soften during the second and third quarters due to the earlier rise in fuel prices, the subsequent decline in crude oil prices has substantially reduced the likelihood of further increases in retail petrol and diesel prices. This, it said, should help ease pressure on consumer spending in the latter part of the year.
Goldman Sachs also expects lower commodity prices to ease the government's subsidy burden, particularly on fertilisers and petroleum products. The decline in global urea prices is likely to reduce pressure on fertiliser subsidies, while cheaper crude oil is expected to lower overall fiscal stress in the near term.
On the inflation front, the report said falling oil prices have significantly reduced the risk of further fuel price increases and eased cost pressures on petrochemical products, prompting the bank to lower its projections for both headline and core inflation.
The investment bank further observed that India's external sector has strengthened due to lower energy import costs and healthy remittance inflows, improving the country's overall macroeconomic position.
Despite the optimistic outlook, Goldman Sachs cautioned that weather-related uncertainties and the lingering impact of earlier fuel price increases could continue to weigh on consumer demand in the short term before economic momentum strengthens further during the remainder of the year.