Sharp downgrade for India – Goldman Sachs cut India’s FY26 GDP growth forecast to 5.9%, from an earlier estimate of 7% before the Iran war, according to a report by Reuters. This is the second downgrade by Goldman Sachs since Middle East conflict escalated. It also sees risk of rate hike in upcoming April Policy meet by RBI on heightened inflation concerns.
Before this, Goldman Sachs had reduced the forecast to 6.5% in March 13. The fresh cut in growth estimate by Goldman’s analysts follows a change in their assumptions on oil prices and the period of disruption to supplies. Elevated crude prices are a key foreign exchange, inflation and fiscal risk for net energy importer India.
Goldman Sachs expects Crude to scale up to $115 in April
Brent crude is currently hovering around $102.57 per barrel today, although it earlier touched $119 following the Iran–US war.
Goldman now expects the near-shutdown of flows through the Strait of Hormuz to extend into mid-April, before normalising over the following 30 days. It expects Brent crude prices to average $105 in March and $115 in April, before falling to $80 per barrel in the fourth quarter of the year.
Goldman Sachs raises India’s inflation forecast to 4.6%, expects repo rate hike
Goldman Sachs now sees inflation in India rising to 4.6% in 2026 from their earlier expectation of 3.9%.
While inflation will remain within the central bank’s tolerance band of 2-6%, Goldman expects a 50 basis point hike in the policy repo rate to counter pressures from a depreciating Indian currency.
The rupee has fallen 4% against the US dollar so far in 2026 after weakening 4.7% last year. With the currency under depreciation pressure, FX pass-through to retail prices is likely to be significant, Goldman said.
Reserve Bank of India is scheduled to meet in April 6-8 for its bimonthly monetary policy meeting, first time in FY27 and since the war between Iran and the US esclated on February 28.
The bank added that India’s current account deficit could widen to 2% of GDP in 2026, in its report. India’s current account deficit (CAD) stood at 1.3% of GDP in the October-December 2025 period.