NEW DELHI, Dec. 17 — India’s economy is expected to expand 7.5% in FY26 before slowing modestly to 7% the following year, driven by steady domestic demand and improving investment conditions, CareEdge Ratings said in a report released Wednesday.
The rating agency also projected a rebound in the rupee, which has recently slipped beyond the 91-per-dollar mark. The currency is expected to strengthen to the 89–90 range in FY27 as macroeconomic conditions stabilize.
“India’s macroeconomic outlook remains constructive heading into FY27,” said Rajani Sinha, chief economist at CareEdge Ratings. “Even with global uncertainties, the economy is likely to sustain healthy growth of around 7%.”
CareEdge said easing inflation, lower interest rates and a reduced tax burden will support consumption and investment. It added that a possible trade agreement between India and the United States could provide additional support to growth.
The agency pointed to early signs of a revival in the capital expenditure cycle, noting strong order book expansion among capital goods manufacturers. Rising gross foreign direct investment inflows also suggest increasing confidence among global investors, it said.
“Structural reforms such as the new labour code are expected to improve investor sentiment further,” the report said.
After a strong performance in the first half of FY26, economic growth is expected to moderate to about 7% in the second half, the agency said. It attributed the slowdown to waning export front-loading and normalization in consumer spending after the festive season, while maintaining its full-year growth estimate of 7.5%.
On trade, CareEdge projected India’s goods exports to decline by about 1% in FY26, compared with a marginal increase of 0.1% in FY25. Merchandise exports to the United States have fallen across most segments, the agency noted.
At the same time, exports of tariff-affected products such as gems, jewellery and textiles have increased to markets like Hong Kong and the United Arab Emirates, reflecting changing trade patterns.
“These shifts in export destinations will need close monitoring,” the report said.
CareEdge said India’s current account deficit will remain contained at around 1% of GDP in FY26 and FY27.
On fiscal management, the agency said the central government is on track to meet its FY26 fiscal deficit target of 4.4% of GDP and could reduce the deficit by another 0.2 percentage points in FY27.
