Goldman Sachs has lowered its 2026 growth outlook for India and now expects a 50-basis point increase in policy rates as the economy faces significant currency depreciation.
In a report released on Tuesday, the bank projects India’s economy will expand by 5.9% in calendar year 2026, down from its earlier estimate of 7% made before the Iran conflict.
This follows on from a prior downgrade on 13th March, when Goldman Sachs had already reduced its forecast to 6.5%.
Goldman Sachs’ latest downgrade in India’s growth outlook reflects revised assumptions about oil prices and how long supply disruptions may last. As a net energy importer, India faces heightened risks to its currency, inflation, and fiscal balance when crude prices rise.
The bank now anticipates that the near halt in shipments through the Strait of Hormuz will continue until mid-April, with conditions improving over the following month, Reuters reports.
It forecasts Brent crude will average around $105 per barrel in March and $115 in April, before easing to around $80 per barrel by the final quarter of the year.
Analysts at Goldman Sachs have raised their inflation forecast for India to 4.6% in 2026, up from an earlier estimate of 3.9%.
Although this would still fall within the central bank’s target range of 2-6%, the bank expects a 50-basis point increase in the policy repo rate to help offset pressures stemming from the weakening Indian currency.
The Rupee has declined 4% against the US Dollar so far in 2026, after already dropping 4.7% in the previous year. Goldman Sachs noted that this continued depreciation is likely to significantly pass through to consumer prices, adding to inflationary pressures.
Furthermore, the bank also warned that India’s current account deficit could widen to 2% of GDP in 2026. By comparison, the deficit stood at 1.3% of GDP in the October–December quarter of 2025.