The rating company expected the rupee to hover around 89-90 levels against the dollar in FY27.
The upward revision of the annual growth projection was on the basis of the higher-than-expected growth in the first half of the fiscal.
However, chief economist Rajani Sinha said that GDP growth would moderate in the second half as the impact of front loading of exports is faded and consumption demand moderated post festive season.
“By the fourth quarter of FY26, the low base effect will also wane, and the deflator will increase from the current low level,” she said Wednesday, releasing the outlook on the Indian economy.
“Healthy agricultural activity, reduced income tax burden, rationalisation of GST rates, repo rate cuts, festive demand and front loading of exports supported growth in the first half,” she said.
The rating company projected the nominal GDP growth at 8.3%, lower than the budgeted 10.1% for FY26.Sinha, meanwhile, exuded confidence in the government meeting its fiscal deficit target of 4.4% in FY26 despite being slow in garnering tax revenue in the first half.
The centre’s gross tax collection has recorded weak growth of 4% on-year in the first seven months of the fiscal as against budgeted growth of 12.5% for the full year. However, non-tax revenues rose, aided by a higher Rs 2.7 lakh crore dividend from the Reserve Bank of India.
Revenue expenditure has remained largely flat during 7MFY26, even as capital expenditure continued to record healthy double-digit growth.
“Overall, revenue shortfall from slower growth in tax collections is expected to be offset by RBI’s higher dividend transfer and lower revenue spending,” Sinha said.
She expects steady foreign direct investment inflows going forward, even as the repatriation remained high leading to outflows on a net basis.
She said that India’s capacity expansion is showing early signs of revival as reflected by strong growth in the order book of capital goods companies.
“Foreign investors are also making a note of India’s growth opportunity, getting reflected in a jump in gross FDI inflows into the country, specially in the new age sectors like EV, renewables, electronics, data centre and AI infrastructure. Factor market reforms like the new labour code will give further confidence to domestic and global investors.”