The brokerage said 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.

Goldman Sachs has upgraded India's macroeconomic outlook for calendar year 2026 following the recent US-Iran peace deal, raising its real GDP growth forecast while lowering its inflation and current account deficit projections, citing easing oil prices and improving domestic economic conditions.

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.

"On balance, with the recent downward revision in the oil price forecast by our commodities team ($82/bbl average in Q3-Q4 CY26, vs. $92/bbl earlier and $75/bbl average in CY27, vs. $80/bbl earlier), we raise our real GDP growth forecast for CY26 by 0.3pp to 6.8 per cent y-o-y, lower our headline inflation forecast by 0.2pp to 4.4 per cent y-o-y and lower our current account deficit forecast by 0.2pp to 1.1 per cent of GDP," the report said.

Resilient economy

According to Goldman Sachs, India's economy has remained resilient despite the disruptions caused by the Middle East conflict, as government fiscal and quasi-fiscal measures helped cushion the impact of higher energy prices on consumers.

"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 report noted.

The brokerage said 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.

Short-term headwinds

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 fiscal pressures. "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," it said.

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.

"Overall, we lower our current account deficit forecast for CY26 further by 0.2pp to 1.1 per cent of GDP," Goldman Sachs said, adding that it now expects a balance of payments surplus of 0.7 per cent of GDP for the year.

The brokerage, 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.

Published on June 26, 2026