NEW DELHI, Dec. 17 — India’s economy is projected to grow 7.5% in FY26 before easing to 7% the following year, supported by stable inflation, lower interest rates and improving investment conditions, CareEdge Ratings said Wednesday.
Despite global uncertainty, the rating agency said India’s macroeconomic outlook remains favorable heading into FY27. It also forecast a recovery in the rupee, which has recently fallen past the 91-per-dollar level, to around 89–90 in FY27.
“India’s macroeconomic outlook remains constructive heading into FY27,” said CareEdge Chief Economist Rajani Sinha. “Even with external uncertainties lingering, the economy is expected to record healthy growth of 7% in FY27.”
Sinha said domestic demand will be supported by easing inflation, a lower tax burden and softer borrowing costs. A potential U.S.-India trade agreement could further strengthen growth prospects, she added.
The agency noted early signs of revival in the capital expenditure cycle, citing strong order book growth among capital goods companies. Rising gross foreign direct investment inflows also indicate growing confidence among overseas investors, it said.
“Market reforms, including the new labour code, are expected to provide additional confidence to both domestic and global investors,” the report said.
CareEdge expects economic momentum to slow in the second half of FY26, with growth moderating to about 7%, after a strong first half. The slowdown is attributed to fading export front-loading and a normalization in consumption following the festive season, though full-year growth is still seen at 7.5%.
On the external front, the agency projected goods exports to contract by about 1% in FY26, compared with marginal growth of 0.1% in FY25. Merchandise exports to the United States have declined across categories, it said.
However, exports of tariff-affected goods such as gems, jewellery and textiles have increased to markets including Hong Kong and the United Arab Emirates, indicating a shift in export destinations.
“Changes in export market dynamics will remain a key area to watch,” the agency said.
The current account deficit is expected to remain manageable at around 1% of GDP in both FY26 and FY27, CareEdge said.
On public finances, the Centre is projected to meet its fiscal deficit target of 4.4% of GDP in FY26 and further narrow the gap by up to 0.2 percentage points in FY27, the agency added.
