India's Growth Slashed Amid Oil Price Fears

Goldman Sachs has reduced India's projected economic growth for 2026 to 5.9%, a notable decrease from its earlier forecast. This downward revision is primarily attributed to the ongoing Gulf conflict and its subsequent impact on global oil prices. The firm also anticipates a 50 basis point rise in policy rates.

The increase in crude oil prices presents considerable risks to India's economy, particularly affecting its foreign exchange reserves, inflation rates, and fiscal position, as the nation relies heavily on energy imports.

Disruptions in key shipping routes are expected to persist, contributing to elevated Brent crude prices in the near term. Goldman Sachs forecasts India's inflation to rise to 4.6% in 2026, up from previous estimates.

Additionally, the bank projects India's current account deficit to widen to 2% of GDP in 2026. Lower-income countries with high energy import needs, like India, face the greatest risks from potential energy shortages.