Good news for India amid US-Iran ceasefire; Goldman Sachs raises GDP growth forecast for 2026 to 6.8 percent
The investment bank has also increased its GDP growth forecast for India for the 2027 fiscal year by 40 basis points to 6.5 per cent.
(Representational image/AI generated)
New Delhi: Peace talks in West Asia have led to a drop in crude oil prices and eased supply chain challenges. Amidst this, there is good news for India as well. Global investment bank Goldman Sachs has raised its GDP growth forecast for India for 2026 to 6.8 per cent, up from the earlier projection of 6.5 per cent.
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The investment bank has also increased its GDP growth forecast for India for the 2027 fiscal year by 40 basis points to 6.5 per cent. In its latest report, Goldman Sachs stated that it revised its projections after the significant drop in crude oil prices reduced risks to the Indian economy.
Why The Revision?
It has also lowered the forecast for core inflation by 0.2 percentage points to 4.4 per cent and reduced the current account deficit projection by 0.2 percentage points to 1.1 per cent of GDP. The investment bank now expects the Balance of Payments (BoP) to show a surplus of 0.7 per cent of GDP this year.
The investment bank stated that it revised its growth outlook upwards due to better-than-expected economic activity in the first quarter of 2026 and lower crude oil prices. Driven by robust investment and strong activity in the services sector, India's real GDP growth stood at 7.8 per cent year-on-year in the first quarter.
Subsidy Bill
Although Goldman Sachs expects consumption growth to slow down in the second and third quarters due to earlier hikes in fuel prices, the drop in oil prices has significantly reduced the need for further increases in retail fuel prices. This will limit additional pressure on household spending after the third quarter.
The report also notes that the softening of global commodity prices is expected to reduce the government's subsidy bill for fertilizers and petroleum products. Regarding inflation, Goldman Sachs stated that low crude oil prices have significantly reduced the risk of further hikes in petrol and diesel prices and eased pressure on petrochemical products, leading to downward revisions in forecasts for both core and headline inflation.
What Is The Issue?
The report also notes that low oil prices and robust remittance inflows have improved the outlook for India's external sector. However, Goldman Sachs believes that weather-related uncertainties and the lagged impact of earlier fuel price hikes could temporarily dampen consumption before the economy gains further momentum later in the year.
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