Goldman Sachs lowers India’s GDP growth forecast for 2026 to 5.9%
Although inflation is expected to stay within the Reserve Bank of India's target range, Goldman Sachs anticipates upward pressure on consumer prices from currency depreciation and higher import costs.
- Mar 24, 2026,
- Updated Mar 24, 2026 12:50 PM IST
Goldman Sachs has lowered India's GDP growth forecast for 2026 to 5.9 per cent, down from 7 per cent before the US-Iran conflict. They had lowered it to 6.5 per cent in March. The revision follows rising crude oil prices due to supply disruptions, especially near the Strait of Hormuz.
The investment bank expects Brent crude to average $105 per barrel in March and $115 in April if the disruption continues until mid-April. It has also raised India's inflation forecast for 2026 to 4.6 per cent, up from 4.2 per cent in mid-March and 3.9 per cent before the conflict.
Although inflation is expected to stay within the Reserve Bank of India's target range, Goldman Sachs anticipates upward pressure on consumer prices from currency depreciation and higher import costs. The report projects a 50 basis points hike in the policy repo rate this year, from the current 5.25 per cent, to manage inflation and currency weakness.
Supply disruptions in the Strait of Hormuz could have lasting effects on oil prices and inflation. If flows remain halted until mid-May or if infrastructure damage prolongs supply issues, Brent crude could stay around $100 to $115 per barrel in the last quarter of 2026. This would likely increase inflation and weigh on economic growth.
Goldman Sachs notes that while higher inflation is a concern, the more significant impact over time may be on growth due to prolonged supply constraints and elevated oil prices. The Indian rupee has weakened by 4 per cent against the US dollar this year, following a 4.7 per cent decline in 2025, adding to inflationary pressures.
The currency depreciation is expected to increase the pass-through effect to retail prices, influencing inflation further. Additionally, Goldman Sachs forecasts India's current account deficit could widen to 2 per cent of GDP in 2026, up from 1.3 per cent in the October-December 2025 quarter, reflecting challenges from higher import costs and currency depreciation.
Goldman Sachs has lowered India's GDP growth forecast for 2026 to 5.9 per cent, down from 7 per cent before the US-Iran conflict. They had lowered it to 6.5 per cent in March. The revision follows rising crude oil prices due to supply disruptions, especially near the Strait of Hormuz.
The investment bank expects Brent crude to average $105 per barrel in March and $115 in April if the disruption continues until mid-April. It has also raised India's inflation forecast for 2026 to 4.6 per cent, up from 4.2 per cent in mid-March and 3.9 per cent before the conflict.
Although inflation is expected to stay within the Reserve Bank of India's target range, Goldman Sachs anticipates upward pressure on consumer prices from currency depreciation and higher import costs. The report projects a 50 basis points hike in the policy repo rate this year, from the current 5.25 per cent, to manage inflation and currency weakness.
Supply disruptions in the Strait of Hormuz could have lasting effects on oil prices and inflation. If flows remain halted until mid-May or if infrastructure damage prolongs supply issues, Brent crude could stay around $100 to $115 per barrel in the last quarter of 2026. This would likely increase inflation and weigh on economic growth.
Goldman Sachs notes that while higher inflation is a concern, the more significant impact over time may be on growth due to prolonged supply constraints and elevated oil prices. The Indian rupee has weakened by 4 per cent against the US dollar this year, following a 4.7 per cent decline in 2025, adding to inflationary pressures.
The currency depreciation is expected to increase the pass-through effect to retail prices, influencing inflation further. Additionally, Goldman Sachs forecasts India's current account deficit could widen to 2 per cent of GDP in 2026, up from 1.3 per cent in the October-December 2025 quarter, reflecting challenges from higher import costs and currency depreciation.