India’s economic outlook has brightened following the US-Iran truce, with Goldman Sachs raising its growth forecasts and turning more optimistic on inflation as lower crude oil prices ease pressure on the country’s import bill.In a report titled India: Improved Macro Outlook After the US-Iran Deal, the global investment bank said the recent de-escalation in West Asia and a softer oil price outlook have materially improved India’s macroeconomic prospects.
“Overall, Q2 CY26 real GDP growth is tracking above our earlier expectations,” Goldman Sachs said, adding that the stronger growth trajectory, coupled with lower oil price assumptions, prompted an upward revision to its forecasts.
Growth outlook gets a liftGoldman Sachs has raised its CY26 real GDP growth forecast by 0.3 percentage points to 6.8% year-on-year. The revision follows a sharp fall in crude prices after fears of a prolonged disruption in the Strait of Hormuz receded.The strait accounts for nearly a fifth of India’s trade flows and more than 60% of its energy imports, making it a critical artery for the economy.
The investment bank’s commodities team now expects crude oil to average $82 per barrel in the second half of CY26, down from its earlier estimate of $92 per barrel. For CY27, it sees oil averaging $75 per barrel, compared with a previous forecast of $80.”On balance, with the recent downward revision in the oil price forecast by our commodities team… we raise our real GDP growth forecast for CY26 by 0.3pp to 6.8% yoy,” the report noted.Inflation risks ease, but weather remains a concernGoldman Sachs also lowered its inflation forecast to 4.9% from 5.1%, citing softer crude and fertiliser prices.”The sharp correction in global urea prices should reduce upside risk to the fertiliser subsidy bill versus our earlier expectations,” it said, adding that lower oil prices should help ease near-term fiscal pressures.Also Read: West Asia truce eases pressure on India Inc profits, says CrisilHowever, the bank cautioned that weather-related risks remain a near-term challenge. “Weather-related uncertainties and IMD forecasts of heatwaves remain a headwind, particularly to rural consumption growth,” it said.While Goldman Sachs continues to expect the Reserve Bank of India to raise rates by 50 basis points in 2026, it said a sustained decline in petrochemical prices could reduce inflationary pressures and potentially delay the tightening cycle.
Source link
