Goldman Sachs Cuts India 2026 GDP Forecast to 5.9%, Citing Oil and Rupee Pressures

Goldman Sachs Research trimmed its India calendar-year 2026 GDP growth forecast to 5.9% on March 24, the bank's second downgrade in less than two weeks and its starkest acknowledgment yet of how the US-Iran war is reshaping emerging-market macro conditions.

Goldman now projects India's economy growing at 5.9% in calendar year 2026, compared to its pre-Iran war forecast of 7%, having already cut the figure to 6.5% on March 13. The latest 60-basis-point reduction was described by The Hindu BusinessLine's Shishir Sinha as "the first forecast revision by any agency post beginning of war," putting Goldman ahead of peers in formally repricing India's outlook.

The driver is crude. The fresh cut follows a change in Goldman's assumptions on oil prices and the period of supply disruption, with elevated crude prices identified as a key foreign exchange, inflation, and fiscal risk for net energy importer India. Goldman now expects the near-shutdown of flows through the Strait of Hormuz to extend into mid-April before normalizing over the following 30 days, with Brent crude averaging $105 per barrel in March and $115 in April before falling to $80 in the fourth quarter. The closure has been described as the largest disruption to energy supply since the 1970s energy crisis.

For India specifically, the shock is hitting on multiple fronts simultaneously. India imports approximately 85% of its crude oil, making it highly sensitive to sustained high energy prices. The rupee has fallen 4% against the US dollar so far in 2026 after weakening 4.7% last year, and with the currency under depreciation pressure, FX pass-through to retail prices is likely to be significant, Goldman said. Unlike past oil shocks where higher prices boosted Middle Eastern economies and led to increased remittances and exports for India, the current conflict is hurting those economies, resulting in a simultaneous negative impact on India's import costs, export demand, and remittance inflows.

On inflation, Goldman analysts now see India's 2026 inflation rising to 4.6% from their earlier expectation of 3.9%. BusinessToday separately reported that Goldman had raised its India inflation forecast to 4.6%, up from 4.2% in mid-March and 3.9% before the conflict began, suggesting the bank made a mid-month inflation revision alongside its March 13 growth cut. Clarification from Goldman on the precise prior baseline is warranted.

Despite inflation remaining within the Reserve Bank of India's 2-6% tolerance band, Goldman is forecasting a monetary policy response. Goldman expects a 50 basis point hike in the policy repo rate to counter pressures from a depreciating Indian currency. The RBI had kept its policy rate at 5.25% in February 2026, maintaining a neutral stance. Goldman's report projects the 50 basis point hike would bring the current repo rate to 5.75%.

The external balance is also deteriorating. Goldman added that India's current account deficit could widen to 2% of GDP in 2026. That compares to a deficit of 1.3% of GDP during the October-December 2025 quarter. Goldman's report, titled "A Tighter Squeeze on Asia's Energy Supply," places India in a category of its own among regional peers: "New cuts to our growth forecasts are negligible in Japan, China, Korea, and Taiwan, but more than 0.5pp in India, Philippines, Thailand, and Singapore." The bank also flagged similar current account deficit pressures for Indonesia, the Philippines, and New Zealand.

Goldman warned in the report that these scenarios "would imply further upward adjustments to near-term inflation, and downward adjustments to growth, with the latter becoming relatively more important over time." If the Strait of Hormuz opens mid-April and flows take 30 days to normalize, Brent could fall to $80 in the fourth quarter. But if disruptions last until mid-May, Brent may remain around $100; if infrastructure damage prolongs the hit, it could rise to $115 in the fourth quarter.

For Goldman's own economists and research staff in the region, the pace of revisions reflects a fast-moving macro environment: two GDP cuts in eleven days, each driven by updated assumptions on a geopolitical situation still in flux. With the RBI's next policy meeting on the horizon and no clear timeline for Hormuz normalization, a third revision cannot be ruled out.