Goldman Sachs Lowers India's Growth Forecast for 2026 Amid Rising Oil Prices

Goldman Sachs has revised India's growth forecast for 2026 down to 5.9% due to rising oil prices and geopolitical tensions, particularly the Iran conflict. The firm anticipates that inflation will rise to 4.6%, prompting potential interest rate hikes by the Reserve Bank of India. With the rupee depreciating against the dollar, the economic outlook raises concerns about retail prices and the current account deficit. This article delves into the implications of these changes and what they mean for India's economy moving forward.

By Narendra Chaudhary Mar 24, 2026, 17:56 IST

India's Economic Outlook

Goldman Sachs, a global brokerage firm, has significantly revised its growth forecast for India for the year 2026. Due to the ongoing conflict in Iran and escalating oil prices, the bank now predicts that the country's economy will expand at a mere 5.9 percent. Prior to the Israel-Iran conflict, the growth estimate was set at 7 percent. In a report released on Tuesday, Goldman Sachs noted that it had previously projected a growth rate of 6.5 percent on March 13. However, disruptions in oil supply and new price forecasts have led to this downward revision.

The situation in the Strait of Hormuz could lead to a near-total halt in oil supply due to the Iran conflict, potentially lasting until mid-April. The bank anticipates that the average price of Brent crude oil will be around $105 per barrel in March, with a rise to $115 in April. Nevertheless, a recovery is expected later in the year, with prices possibly dropping to $80 per barrel by year-end. It is important to note that India imports approximately 85 percent of its oil needs, making high oil prices a significant threat to foreign exchange, inflation, and government spending.

Potential Rate Hike by RBI
Goldman Sachs has also raised its inflation forecast for 2026 to 4.6 percent, up from a previous estimate of 3.9 percent, which was below 4 percent. While this inflation rate remains within the Reserve Bank of India's (RBI) target range of 2 to 6 percent, a weakening rupee could push inflation higher. Consequently, the bank warns that the RBI may need to increase the repo rate by 50 basis points (0.5 percent).

Continuous Decline of the Rupee
So far in 2026, the rupee has depreciated by 4 percent against the dollar, following a 4.7 percent decline last year. The bank indicates that the pressure on the rupee will significantly impact retail prices due to foreign exchange fluctuations. The report suggests that India's current account deficit could reach 2 percent of GDP in 2026, compared to 1.3 percent in the fourth quarter of 2025.