Goldman Sachs, a global investment firm, has forecast a robust economic prognosis for India, supported by a gradual rebound in lending conditions and a persistent momentum in spending. According to its India 2026 projection, the company projects real GDP growth of 6.7% in 2026 and 6.8% in FY27, both of which are higher than the current market consensus. The evaluation coincides with Finance Minister Nirmala Sitharaman’s preparation to deliver the Union Budget for 2026–2027 on February 1, amid increased anticipation of policy initiatives boosting household demand.
According to the research, consumption rather than new, capital expenditure-intensive governmental expenditures is increasingly supporting India’s development engine. A widespread recovery in household consumption, according to Goldman Sachs, will be crucial in buffering overall economic growth as fiscal headroom tightens following years of retrenchment.
Consumption-driven momentum intensifies
Goldman Sachs predicts that the early urban consumption rebound saw in CY25 will continue to grow in CY26. The recent rationalization of GST rates, better liquidity conditions, and the delayed effects of monetary easing are anticipated to help this development. After peaking at 9.4% year over year in the second quarter of CY25, bank credit growth increased to 11.2% in the fourth quarter and is expected to rebound to about 13% in CY26.
According to the analysis, real consumption growth is predicted to increase to 7.7% year over-year in 2026 from 7.0% in 2025 due to this credit resurgence and strong rural demand.
This contrasts with the 7.3% growth in 2024, suggesting a consistent rising trend in household expenditure.
Recalibrating policies for a year
Despite obstacles including higher US tariffs and earlier fiscal contraction, India’s real GDP growth remained steady at 7.6% year over year in 2025. This resiliency, according to Goldman Sachs, is mostly due to consumption rather than growth driven by investments. While urban consumption started to stabilize under pressure from stricter lending conditions in 2023 and 2024, rural demand exhibited a steady rebound.
Due to increasing capital goods output and government capital spending, investment activity also improved in the first half of CY25. Nonetheless, the study emphasizes that, thanks to favorable internal circumstances, consumption continued to be the more reliable driver of growth.
Shifts in fiscal assistance to households
The government’s growth plan underwent a discernible change in the last year. The Center changed the makeup of expenditure and slowed the rate of consolidation in FY26 following two years of vigorous budgetary restriction. GST rates on mass-consumption goods were lowered, contributing an estimated 0.2% of GDP in consumer assistance, while income tax slabs were changed to offer personal tax relief equal to around 0.3% of GDP.
Real household earnings increased dramatically as a result of these policies and moderate inflation. Even as nominal GDP growth slowed, headline CPI inflation, which averaged only 2.2% in 2025 and dropped to a historic low of 0.3% year over year in October, supported the rebound in spending.
Urban recovery, rural strength
In 2025, the rebound in consumption was not uniform but became more widespread. Good crop production, favorable weather, and increased state-level cash transfers to women— which now account for about 0.7% of GDP—all contributed to the growth of rural demand. In the second part of the year, urban consumption, which accounts for about 80% of household credit, started to catch up.
As the actual economy benefits from improved financial conditions and policy rate decreases, Goldman Sachs predicts that this gap will close even further in 2026.
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