Global brokerage firm Goldman Sachs has significantly reduced its estimate of the country’s growth rate for 2026. Citing the Iran-related conflict and rising oil prices, the bank is now projecting that the country’s economy will grow only 5.9 percent in 2026. Before the conflict between Israel and Iran, the growth rate was estimated at 7 percent. A report released by Goldman Sachs on Tuesday said that, on March 13 itself, the firm had revised its estimate to 6.5 percent. However, growth estimates have now been downgraded following oil supply disruptions and revised price estimates.
Due to the conflict involving Iran, an almost complete interruption of oil supplies through the Strait of Hormuz could last until mid-April. The bank estimates that the average price of Brent crude oil will remain around $105 per barrel in March, and could potentially reach $115 per barrel in April. However, prices are expected to moderate thereafter, potentially falling to $80 per barrel by the end of the year. It is worth noting that India imports about 85 percent of its oil needs. As a result, spending on expensive oil poses a major risk to India’s foreign exchange reserves, inflation outlook and government spending.
RBI may be forced to increase interest rates
Goldman Sachs also said it has raised its inflation forecast for the country to 4.6 percent for 2026. Earlier, this figure was 3.9 percent, down from 4 percent. Although inflation is expected to remain within the Reserve Bank of India (RBI) target range of 2 to 6 percent, the weakening rupee could push inflation further. Therefore, the bank has issued a warning that RBI may be forced to increase the repo rate by 50 basis points (0.5 percent).
Continuous decline in rupee
So far in 2026, the rupee has weakened 4 percent against the dollar. Last year, it had weakened by 4.7 percent. The bank says that the pressure on the rupee due to fluctuations in foreign exchange will have a significant impact on retail prices. According to the report, India’s current account deficit could reach 2 percent of GDP in 2026. It was 1.3 percent in the December 2025 quarter.
