In its latest report, the investment bank said the Indian economy remained resilient during the Middle East shock, supported by fiscal and quasi-fiscal measures that absorbed much of the increase in energy costs and limited the impact on consumers.
Goldman Sachs now expects crude oil prices to average $82 a barrel in the second and third quarters of FY27, down from its earlier estimate of $92. “Consumption held up in March and April, even as investment somewhat softened amid supply disruptions and commercial LPG allocations remained around 70% of pre-conflict levels,” the report said.
It added that easing supply constraints had already begun supporting a recovery in investment-related indicators in May after they hit lows in March and April.
India’s gross domestic product expanded 7.8% year-on-year in the March quarter, lifting FY26 growth to 7.7%, according to official data.
Goldman Sachs expects higher fuel prices to weigh on consumption in the first quarter of FY27, with some spillover into the second quarter as households adjust to higher costs. However, it does not expect any additional drag on consumption beyond the third quarter because of the limited need for further increases in retail fuel prices.
The report cautioned that weather-related risks, including heatwaves, remained a headwind, particularly for rural consumption.On monetary policy, Goldman Sachs expects the Reserve Bank of India to raise the repo rate by a cumulative 50 basis points in 2026, with 25-basis-point increases in the October and December policy meetings, taking the policy rate to 5.75%. The RBI kept the repo rate unchanged at 5.25% in its June monetary policy review.
On a calendar-year basis, the investment bank raised India’s 2026 growth forecast by 0.3 percentage points to 6.8% and lowered its inflation estimate by 0.2 percentage points to 4.4%.
It also reduced its 2026 current account deficit forecast by 0.2 percentage points to 1.1% of GDP and expects a balance of payments surplus of 0.7% of GDP.