Goldman Sachs lowers India’s 2026 GDP forecast to 5.9% from 7% amid rising crude prices due to Iran conflict.
Brent crude could average $115 per barrel in April if Strait of Hormuz disruptions persist, pressuring inflation and the current account deficit.
The brokerage sees a potential 50 basis-point rate hike as the rupee weakens to record lows against the dollar.
$115 Oil Shock? Goldman Warns of Slower India Growth, Possible Rate Hike
Oil shock from Iran conflict forces Goldman to trim India growth outlook and warn of policy tightening risk
Summary
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Goldman Sachs has slashed its growth estimates for India for 2026 while forecasting a 50 basis-point rate hike in policy rates amid sharp depreciation in the domestic currency. Goldman forecasts the Indian economy is likely to expand by only 5.9% in 2026, as against the estimate of 7% before the Iran war escalated four weeks ago. On March 13, Goldman initially cut its forecast for India to 6.5% before issuing the revised projections on Tuesday.
According to the report, the latest revision by analysts comes amid changes in assumptions on global crude oil prices and the period of disruption to supplies. Elevated crude prices weigh heavily on India’s import bill, put the rupee under pressure, and risk inflation and fiscal space.
On Tuesday, crude fluctuated sharply from its lows on Monday and was trading above $100 per barrel on fears of a prolonged war amid no signs of de-escalation between Iran and the US.
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The Wall Street-based bank now estimates that if the near-complete closure of transit through the Strait of Hormuz continues into mid-April before normalising over the following 30 days, benchmark Brent crude prices could average $105 per barrel in March and $115 per barrel in April before declining to $80 per barrel by the quarter ending December.
Inflation Risks
Goldman analysts now project India’s inflation rising to 4.6% from earlier estimates of 3.9%. Inflation continues to remain within the Reserve Bank of India’s tolerance band. The central bank’s inflation target is 4%, with a tolerance band of +/- 2%. The report added that India’s current account deficit could widen to 2% of GDP in 2026. India’s CAD stood at 1.3% of GDP in the last quarter of 2025.
Repo Hike
Amid growth concerns and limited inflationary risks, Goldman expects the central bank to hike the benchmark policy rate by 50 basis points to counter pressure from a depreciating Indian currency. The Indian rupee has fallen 4% against the greenback this year after emerging as the worst-performing currency last year. On Monday, the rupee hit a record low of 93.98 against the dollar due to rising worries over the escalating war.
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