New Delhi: India’s economy is likely to grow 5.9% in 2026, lower than the 6.5% estimated earlier this month, according to Goldman Sachs as it downgraded global growth forecasts to reflect higher energy prices and an expected longer disruption of energy trade via the Strait of Hormuz.
India’s consumer price index (CPI)-based inflation is likely to be 4.6% this year, up from 4.2% estimated on 13 March, Goldman Sachs Global Investment Research said in its report, titled ‘A tighter squeeze on Asia’s energy supply’, on Tuesday.
The closure of the Strait of Hormuz makes the Indian economy vulnerable to an energy shock as the country imported over 88% of its crude requirements in FY25. If prolonged, it could hit the annual budget as fertilizer and food subsidy bills could go up. The shortage of liquified natural gas (LPG) has already drawn parliament’s scrutiny in the ongoing budget session.
India’s Economic Survey a real GDP (gross domestic product) growth of 6.8-7.2% for FY27. When the new GDP series with 2022-23 as the base year was released in February, chief economic adviser V. Anantha Nageswaran of 7-7.4%, taking into account the interim trade deal announcement with the US.
Even Goldman Sachs’ pre-Iran war f growth was 7% and 3.9% for CPI inflation. However, the war has dampened this optimism.
“We now expect the near-shutdown of Hormuz flows to extend into mid-April before normalizing over the following 30 days, with Brent oil prices to average $105 in March and $115 in April before falling to $80 barrel in Q4,” said the Goldman Sachs report.
Goldman Sachs also highlighted a net decline of $19 billion of foreign exchange reserves at the Reserve Bank of India, adding that it was unadjusted for valuation changes or forward positions.
“Our forecasts now imply 2026 current account deficits of 2% of GDP or larger for India, Indonesia, the Philippines, and New Zealand,” the research said. “Though most governments would prefer to avoid it, monetary policy will end the year tighter than it otherwise would have been in many countries.”
This, said the report, reflects a desire to limit second-round effects via inflation expectations and/or currency depreciation.
“We added hikes in the Philippines and India (50 basis points each)—while inflation is within both central banks’ target bands, currencies have been under depreciation pressure, and FX pass-through to retail prices is likely to be significant,” Goldman Sachs added.
On 23 March, US President Donald Trump said on social media that have had “productive” conversations regarding total resolution of hostilities and that he has instructed to postpone all military strikes against Iranian power plants for five days, subject to the success of these talks.
India’s state-run companies import crude oil from 41 countries, including new suppliers like the US, Nigeria, Angola, Canada, Colombia, Brazil and Mexico, in addition to West Asian nations such as Iraq, Saudi Arabia, UAE, Kuwait and Qatar.
However, the country’s vast coal reserves, which fuel the bulk of its power plants, serve as a buffer against a global liquefied natural gas (LNG) supply shortage.