Goldman Sachs trims India 2026 inflation outlook to 4.5% as commodity prices ease

Goldman Sachs reduced its forecast for India's headline inflation in 2026 by 10 basis points to 4.5% year-over-year, citing softer near-term oil and gas price projections from its commodities team. March CPI rose to 3.4% year-over-year driven by food inflation, while core inflation held steady at 3.4%. The bank projects April headline inflation at 3.8% with food inflation likely higher, and warns upside risks tied to rising input costs from the Middle East conflict.

Key Points

Goldman Sachs cut its 2026 headline inflation forecast for India by 10 basis points to 4.5% year-over-year, citing lower oil and gas price projections from its commodities team.
March headline CPI rose to 3.4% year-over-year from 3.2% in February, led by food inflation - notably vegetables, which increased about 1 percentage point to 3.8% year-over-year.
Core inflation held at 3.4% year-over-year in March; core goods inflation rose 10 basis points to 2.1% due in part to higher tobacco prices after an excise hike.

Goldman Sachs has lowered its headline inflation forecast for India in 2026 by 10 basis points, taking the estimate to 4.5% year-over-year. The investment bank attributed the cut to reduced near-term oil and gas price projections produced by its commodities team.

India's headline Consumer Price Index rose to 3.4% year-over-year in March, up from 3.2% in February. That outcome matched both Goldman Sachs' estimate and Bloomberg consensus. The monthly increase was driven mainly by higher food inflation - vegetables in particular - which rose by roughly 1 percentage point to 3.8% year-over-year, a move the report noted was amplified by a low base.

Core inflation, which excludes food and fuel, remained unchanged at 3.4% year-over-year in March. Within the core category, core goods inflation edged up 10 basis points to 2.1% year-over-year, reflecting higher tobacco inflation following an excise tax-driven price increase in February. Separately, inflation in gold stayed elevated at about 46% year-over-year.

Looking ahead, Goldman Sachs projected April headline inflation at 3.8% year-over-year. The bank said food prices were tracking a sequential rise of 1% month-over-month through April 11, which would translate into roughly 4.8% year-over-year food inflation for April under that tracking.

The commodities team at Goldman Sachs lowered its short-term oil and gas price forecast on the basis of a reduced risk premium. The bank highlighted that the Dubai premium to Brent crude declined from an average of $30 per barrel in March to an average of $10 per barrel in April.

Goldman Sachs also flagged that risks to its April estimate skew to the upside. The bank warned that if higher input costs linked to the Middle East conflict feed through to core goods, that could push overall inflation higher than its current projection.

Implications: The forecast revision reflects commodity-driven disinflationary pressure in the near term, but the bank emphasises that geopolitical-driven cost pressures could reverse that trend and push core goods inflation higher.

Risks

Upside risk to April inflation if higher input costs from the Middle East conflict push up core goods inflation - this would affect manufacturing and consumer goods sectors.
Volatility in oil and gas prices could alter near-term inflation trajectory if the reduced risk premium reverses - impacting the energy sector and broader input cost pressures.
Elevated gold inflation could sustain pressures in sectors tied to precious metals and discretionary spending if the trend continues.

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