The investment bank has also revised its GDP growth forecast for the 2027 fiscal year upward by 40 basis points to 6.5 per cent. In its latest report, Goldman Sachs said the sharp decline in crude oil prices has significantly reduced risks to the Indian economy, prompting an upward revision of its growth projections.
The report stated that the bank has lowered its forecast for core inflation by 0.2 percentage points to 4.4 per cent. It has also reduced its projection for the current account deficit by 0.2 percentage points to 1.1 per cent of GDP. In addition, Goldman Sachs now expects India's Balance of Payments to record a surplus of 0.7 per cent of GDP during the current year.
According to the report, the revised growth outlook is also supported by stronger-than-expected economic activity during the first quarter of 2026 and lower crude oil prices. India's real GDP expanded by 7.8 per cent year-on-year in the first quarter, driven by robust investment activity and sustained strength in the services sector.
Goldman Sachs, however, noted that consumption growth could moderate during the second and third quarters because of the delayed impact of earlier fuel price increases. Despite this, the sharp fall in crude oil prices has substantially reduced the likelihood of additional increases in retail petrol and diesel prices, limiting further pressure on household spending after the third quarter.
The report further stated that softer global commodity prices are expected to reduce the government's subsidy expenditure on fertilizers and petroleum products. It added that lower crude oil prices have significantly eased the risk of further increases in petrol and diesel prices while also reducing cost pressures on petrochemical products. As a result, the investment bank has revised its projections for both core and headline inflation downward.
Goldman Sachs also highlighted that lower oil prices, combined with strong remittance inflows, have strengthened India's external sector outlook. However, the report cautioned that weather-related uncertainties and the delayed impact of earlier fuel price increases could temporarily weigh on consumption before economic momentum strengthens further later in the year.
The revised forecasts underscore improving macroeconomic conditions for India, with easing inflationary pressures, a stronger external sector, and sustained economic activity contributing to a more optimistic growth outlook for both the 2026 and 2027 fiscal years.
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