Goldman Sachs lowers India's economic growth forecast and warns that currency tightening will force interest rate hikes.

Goldman Sachs Group has cut its forecast for India's 2026 economic growth and predicted a 50 basis point increase in policy rates, as the South Asian economy grapples with significant currency depreciation. In a report on Tuesday, Goldman Sachs predicted that the Indian economy will grow by 5.9% in the calendar year 2026, down from the pre-Iran war forecast of 7%. This Wall Street bank had previously lowered its South Asian economic growth forecast to 6.5% on March 13. After changing assumptions about oil prices and supply disruptions, Goldman Sachs analysts once again lowered their expectations for economic growth. Soaring crude oil prices pose major foreign exchange, inflation, and fiscal risks for India, a net energy importer. Goldman now expects the closure of oil flow through the Hormuz Strait to continue until mid-April, then return to normal over the next 30 days, with Brent crude averaging $105 in March, $115 in April, and dropping to $80 per barrel in the fourth quarter of this year. The bank's analysts currently believe that India's inflation rate will rise from the previous expectation of 3.9% to 4.6% in 2026.