country’s economy
Goldman Sachs said on June 25 that India’s economy is likely to grow by 6.5 percent as the US-Iran deal promises peace in West Asia. The research arm of the Global Investment Bank had earlier estimated that the economy would grow by 6.1 percent in the current financial year after the war between Israel-US and Iran, due to which the Strait of Hormuz was closed. The agency said in its report titled “India: Improved Macro Outlook after the US-Iran Deal” that overall, real GDP growth in the second quarter of calendar year 2026 has been higher than our previous expectations. Along with this, our commodity team has also cut the oil price estimates. This strait accounted for about one-fifth of India’s total trade and more than 60 percent of its energy imports.
decline in crude oil estimates
The price of Indian basket crude oil was trading above $100 per barrel for three consecutive months and has fallen to $86.31 in June. On June 24, the price of Indian basket crude oil was $ 70.71 per barrel. “On balance, with the recent reduction in oil price forecasts by our commodities team to an average of $82 per barrel in the third-fourth quarter of calendar year 2026, versus $92 per barrel previously, and to an average of $75 per barrel in calendar year 2027, versus $80 per barrel, we reduce our real GDP growth forecast for calendar year 2026 by 0.3 basis points,” Goldman Sachs said. Points have been increased to 6.8 percent. Fiscal year 2027 will be the first year after the pandemic when the Indian economy may grow below 7 percent. On the basis of higher consumption and investment, the economy had seen a growth of 7.7 percent in the financial year 2026.
Inflation forecast also reduced
Goldman Sachs has also cut inflation estimates in India. According to the Investment Bank, India’s inflation estimate has been reduced from 5.1 percent to 4.9 percent. According to the report, a sharp improvement in global urea prices should reduce the risks to the fertilizer subsidy bill, contrary to our previous expectations. Recent import tenders have fallen well below the highs seen during the peak of the Middle East shock, and combined with low oil prices, should help ease near-term fiscal pressures. However, the agency has warned that weather-related uncertainties will impact demand in the near term.
Will interest rates increase?
It is expected that the US-Iran agreement will have a positive impact on India’s economic stability by reducing geopolitical risks and reducing crude oil prices. Lower oil prices induced by the US-Iran peace deal are expected to ease inflationary pressure in India, potentially leading to the Reserve Bank of India (RBI) keeping interest rates unchanged till FY27. Beyond FY2027, India’s growth may be influenced by sustained domestic demand, export resilience and rural tailwinds.
For example, the automobile sector is expected to benefit from these factors. The agency still expects the central bank to increase rates by 50 bps in two installments in 2026. If the gap between increased polymer prices and core inflation still proves to be narrower than we expect, the rise in core inflation may moderate.
