The revision comes amid the ongoing Gulf conflict, which has prompted changes in oil and gas price forecasts. Higher crude prices pose significant risks to India’s foreign exchange, inflation and fiscal position as the country is a net energy importer.
India’s reduction is the highest compared to other economies such as China (4.7% from 4.8%), South Korea (1.9% from 2%) and Hong Kong (1.8% from 2.6%).
The Wall Street bank expects disruptions in the Strait of Hormuz to continue into mid-April, with a gradual normalisation over the following 30 days. Brent crude prices are projected to average $105 per barrel in March and $115 in April before declining to $80 per barrel in the fourth quarter of the year.
Although India’s inflation remains with the Reserve Bank of India’s (RBI) target of 2-6%, Goldman Sachs anticipates a 50-basis point policy rate hike due to currency depreciation pressures. Inflation is projected to rise to 4.6% in 2026 from its earlier forecast of 3.9%.
The bank highlighted that with currency depreciation pressures, pass through to retail prices could be significant.
Retail inflation rose 3.21% year-on-year in February from 2.74% in January. The monetary policy committee of the Reserve Bank of India will meet earlier next week. It kept the benchmark repo rate unchanged at 5.25% in February.“Though most governments would prefer to avoid it, monetary policy will end the year tighter than it otherwise would have been in many countries,” mentioned the report titled ‘A Tighter Squeeze on Asia’s Energy Supply’.
Goldman Sachs assessed potential risks based on energy import dependence and regional per-capita income. Higher-income, energy-importing countries (e.g., Japan, Korea) tend to have more reserves and can outbid lower-income countries for energy. Consequently, lower-income nations with high import needs, like India and Thailand, face the greatest shortage risks, it noted.
The bank also projected India’s current account deficit to widen to 2% of GDP in 2026. It stood at 1.3% of GDP in the October-December 2025 period.