Goldman Sachs has revised down its economic growth forecast for India in 2026 and now anticipates a 50-basis-point increase in policy interest rates, as the South Asian economy contends with significant currency depreciation.
In a report released on Tuesday, the Wall Street bank projected that India’s economy will expand by 5.9% in calendar year 2026, compared with a pre-Iran conflict forecast of 7%. This follows a previous reduction to 6.5% on March 13.
The latest downward revision came after Goldman Sachs analysts updated their assumptions regarding oil prices and the duration of supply disruptions. Elevated crude prices pose major foreign exchange, inflation, and fiscal risks for India, a net energy importer.
The bank now expects nearly shut-in oil flows through the Strait of Hormuz to persist until mid-April, returning to normal over the subsequent 30 days. It forecasts Brent crude to average $105 in March and $115 in April, before declining to $80 per barrel by the fourth quarter of this year.
Goldman Sachs also raised its inflation projection for India to 4.6% in 2026, up from a prior estimate of 3.9%.
Although inflation is expected to remain within the central bank’s tolerance band of 2%–6%, the bank predicts the policy repo rate will be raised by 50 basis points to counter pressures stemming from the weakening Indian rupee.
The rupee has depreciated by 4% against the U.S. dollar so far in 2026, after a 4.7% decline last year. Goldman Sachs warned that exchange rate pass-through to retail prices could be significant as the currency remains under downward pressure.
The report further indicated that India’s current account deficit is likely to widen to 2% of GDP in 2026. In the October–December period of 2025, the current account deficit stood at 1.3% of GDP.
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