Goldman Sachs on Friday raised India’s 2026 real GDP growth forecast to 6.8%, up 30 basis points from 6.5%, citing lower crude oil prices, easing supply disruptions, and a stronger-than-expected Q1 GDP print of 7.8%, in a report released June 26 titled “India: Improved macro outlook after the US-Iran deal.”
The upgrade completes a full round-trip for Goldman’s India call. The bank had cut India’s 2026 GDP forecast to 5.9% on March 24, its second downgrade in under two weeks, after projecting 7% before the US-Iran war began.
Friday’s note brings the forecast back to 6.8%, a 90 basis point recovery from the war-period trough. No competing Wall Street firm has published a comparably large swing in India’s macro outlook within a single quarter.
Goldman’s Complete Forecast Revision Table — CY26
| Indicator | War-Period Low | Pre-Peace Estimate | Revised (Jun 26) | Change |
|---|---|---|---|---|
| Real GDP Growth (CY26) | 5.9% | 6.5% | 6.8% | +30 bps |
| Real GDP Growth (FY27) | 6.4% | 6.1% | 6.5% | +40 bps |
| Headline CPI Inflation (CY26) | 4.6% | 4.6% | 4.4% | -20 bps |
| Core Inflation (CY26) | — | 3.5% | 3.2% | -30 bps |
| Current Account Deficit (CY26) | 2.0% of GDP | 1.3% of GDP | 1.1% of GDP | -20 bps |
| BoP Surplus (CY26) | Deficit risk | 0.6% of GDP | 0.7% of GDP | +10 bps |
| Crude Oil Forecast Q3-Q4 CY26 | $115/bbl (Apr) | $92/bbl | $82/bbl | -$10/bbl |
| RBI Repo Rate Target | 5.75% | 5.75% | 5.75% | Unchanged |
The Oil Arithmetic That Changed Everything
Goldman’s commodities team now pegs crude oil at $82 per barrel on average in Q3-Q4 CY26, down from $92 per barrel earlier, with a further fall to $75 per barrel pencilled in for CY27.
That single revision cascades through every line of India’s macro model, fuel subsidy bill, fertilizer costs, import bill, rupee pressure, inflation, and ultimately the RBI’s rate path.
At the peak of the Iran war, Goldman had expected Brent to average $105 per barrel in March and $115 in April, with India’s current account deficit widening to 2% of GDP.
That scenario has unwound sharply, Goldman now sees India’s oil import bill at approximately $215 billion, or 5.5% of GDP, and has raised its remittance forecast to $140 billion (3.7% of GDP) from $138 billion earlier.
India’s Q1 7.8% Print: The Data Point Goldman Didn’t Expect
India’s real GDP in Q1 CY26 came in at 7.8% year-on-year, around 50 basis points above Goldman’s prior forecast, driven by stronger investment and services activity.
Gross fixed capital formation hit a six-quarter high of 10.8% year-on-year. Port cargo traffic growth reached a four-month high in May as supply bottlenecks eased from their March-April troughs, a recovery Goldman economists Santanu Sengupta and Arjun Varma cited as evidence that investment momentum survived the Middle East shock largely intact.
Three-wheeler and passenger vehicle sales stayed firm. Services exports grew robustly. The broad-based resilience surprised even Goldman’s own desk, and it’s what gave the bank the confidence to revise FY27 higher by 40 basis points, a larger upgrade than the CY26 revision itself.
The Fertilizer Angle Nobody Is Writing About
Here’s the non-obvious piece. A sharp correction in global urea prices is expected to reduce the upside risk to the government’s fertilizer subsidy bill, with New Delhi already indicating that FY27 fertilizer subsidy requirements could be reassessed.
Combined with lower crude benchmarks trimming the petroleum subsidy burden, the fiscal math is quietly improving in ways that give the government room to either consolidate the deficit faster or front-load capex spending in H2 FY27.
Most market commentary is focused on the oil price move. The fertilizer channel is the second-order fiscal story that isn’t getting attention.
Goldman also embedded a trade call in Friday’s note, short Thai baht against the Indian rupee. Their FX desk assessed the rupee as relatively cheap versus several higher-carry emerging market currencies, including the baht, even as it looks somewhat expensive against the Chinese yuan on a trade-weighted basis.
Capital flow measures announced by the RBI at the June 5 policy meeting, including full hedging cost cover for FCNR(B) deposits and a concessional forex swap facility, have since driven the rupee up more than 1% against the dollar, reinforcing Goldman’s view that further sharp depreciation is off the table near term.
Consumption Will Slow — But Only Temporarily
Goldman expects consumption growth to moderate in Q2 and Q3 2026 due to the lagging impact of earlier fuel price increases on household budgets, with rural consumption additionally facing uncertainty from IMD heatwave forecasts. That’s a real drag and shouldn’t be dismissed.
But from Q4 onwards, the equation shifts. Lower crude removes the need for further retail pump price hikes. The household squeeze has a clear expiry date, which is more than most EM consumption slowdown stories can claim right now.
RBI Rate Path: Hikes Still Coming, But Risk of Deferral Is Real
Despite cutting its CY26 inflation forecast by 20 basis points to 4.4%, Goldman is not calling for rate cuts. The base case remains 50 basis points of cumulative RBI hikes in 2026, 25 bps each in October and December, taking the repo rate to 5.75% from its current 5.25%. After the June 5 MPC meeting left rates unchanged at 5.25%, most economists had expected tightening to begin in October-December.
Goldman explicitly flagged a deferral risk: if petrochemical price pass-through proves more limited, or if crude stays soft beyond CY26 assumptions, the RBI may push the hiking cycle into FY27.
YES Bank noted that if oil prices remain around $70-$75 per barrel and the government undertakes no further fuel pass-through, the case for rate hikes reduces significantly, putting Goldman’s October call in live question if the oil price continues surprising to the downside.
The next hard data trigger: India’s Q2 CY26 GDP print, expected in late August. That’s the number that will either validate Goldman’s consumption-moderation thesis or force a third revision in 2026.
Also Read: Goldman Sachs raises S&P 500 target to 8,000 as AI earnings hit 5-year high
Frequently Asked Questions
Why did Goldman Sachs upgrade India’s GDP forecast to 6.8%?
Goldman cited three factors: a sharp decline in crude oil prices following the US-Iran peace deal, with its commodities team revising the Q3-Q4 CY26 oil forecast down to $82 per barrel from $92 per barrel; a stronger-than-expected Q1 CY26 GDP print of 7.8%; and easing supply disruptions evidenced by a four-month high in port cargo traffic growth in May.
What is Goldman Sachs’ rupee outlook after the US-Iran peace deal?
Goldman’s FX desk views the rupee as fairly valued on a trade-weighted basis and recently recommended a short Thai baht versus long Indian rupee position, citing relative cheapness of the INR against several higher-carry EM currencies. RBI’s June capital flow measures have already pushed the rupee up over 1% versus the dollar.
Will the RBI hike rates in 2026 despite lower inflation?
Yes, Goldman’s base case is a cumulative 50 bps of RBI hikes, 25 bps each in October and December, taking repo to 5.75%. The driver is polymer and petrochemical price pressure, not crude. However, Goldman explicitly flagged a deferral scenario if oil stays soft, which makes the October meeting a live call rather than a settled one.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a SEBI-registered financial advisor before making investment decisions. Track real-time FII/DII flow data on the NiftyTrader FII-DII Dashboard.
