Goldman Sachs raises India's GDP growth to 6.8 pc after US-Iran peace pact
New Delhi, June 26
Goldman Sachs has raised India's GDP growth forecast to 6.8 per cent for calendar year 2026 from 6.5 per cent earlier, following the US-Iran peace deal that has led to lower global oil prices and eased supply chain disruptions.
The investment bank has also raised its FY27 GDP growth forecast for the country by 40 basis points to 6.5 per cent.
In its latest report, titled 'India: Improved macro outlook after the US-Iran deal', the global investment bank said it has revised its forecasts after the sharp decline in crude oil prices reduced risks to the Indian economy.
It has also lowered the headline inflation forecast by 0.2 percentage points to 4.4 per cent year-on-year and lowered the current account deficit forecast by 0.2 percentage points to 1.1 per cent of GDP. The investment bank now expects a balance of payments surplus of 0.7 per cent of GDP for the year.
The Goldman Sachs report said: "The Indian economy remained resilient through the Middle-East shock, as fiscal and quasi-fiscal measures absorbed much of the increase in energy costs and limited pass-through to consumers."
The investment bank said that stronger-than-expected economic activity in the first quarter of CY26, along with lower crude oil prices, prompted it to revise its growth outlook upward. India's real GDP growth in the first quarter came in at 7.8 per cent year-on-year, supported by resilient investment and robust services activity.
While Goldman Sachs expects consumption growth to moderate during the second and third quarters due to the earlier increase in fuel prices, it believes 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 report added that softer global commodity prices are expected to reduce the government subsidy bill on fertilisers and petroleum products. "The sharp correction in global urea prices should reduce upside risk to the fertilizer subsidy bill versus our earlier expectations... together with lower oil prices, should help ease near-term fiscal pressures," the report states.
On inflation, Goldman Sachs said 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.
The report added that lower oil prices and stronger remittance inflows have improved India's external sector outlook.
Goldman Sachs, however, maintained that weather-related uncertainties and the impact of earlier fuel price increases could remain short-term headwinds for consumption before the economy gathers further momentum later in the year,
— IANS
Reader Comments
Great for the economy but middle class families are still struggling with inflation. Yes, oil prices are down, but vegetable prices and rent are through the roof. Hope this growth trickles down to us soon. 🤞
Impressive resilience by India. While the US-Iran deal helped, India's strong domestic demand and services sector are the real drivers. 7.8% Q1 growth is remarkable. The subsidy savings will also help the fiscal deficit. Smart move by the government to absorb energy costs without passing them fully to consumers.
Ek number! 🎉 But honestly, these Goldman Sachs reports are for FIIs, not for us. The real test is whether India can sustain this without external shocks. Monsoon is crucial, and those "weather-related uncertainties" could spoil the party. Still, good to see optimism.
The report says consumption will moderate due to earlier fuel price hikes. That's the reality - we already paid the price. But at least now there's hope. Lower fertiliser subsidy bills means more money for infrastructure. Hope the government uses this wisely. Focus on job creation please! 💼
India's handling of the Middle East shock was impressive. Many other emerging markets would have faced currency crises. The RBI deserves credit for managing inflation expectations. But 4.4% inflation is still above the 4% target. Let's see if this peace holds - geopolitics can change overnight.
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