Growth vs Currency Decoding India's FY26 Financial Projection

India’s economy will expand in FY26 , but the rupee is under pressure. Read more on how this growth-currency split could affect investors, consumers and markets.

India is heading into FY26 with a very favorable tailwind. The country's Q4 FY25 GDP came in 7.4% lifting full-year growth above forecast. This momentum is also supported by strong estimates from the IMF and Moody’s, which see the GDP growth of 6.5 - 6.7 percent in FY26.

But in all the positivity, there’s a big red flag— the depreciation in Indian Rupee (INR).

📈 The Growth Engine What Is Driving India’s Growth

The financial backbone of India derives from:

Strong Manufacturing & Infrastructure Push – Led by government capex and PLI (Production Linked Incentive) schemes.

Banking Sector resilience – NPAs were at multi‐year lows and strong credit growth persisted.

Digital & Service Economy Boom – IT, Fintech, and digital public infra are getting global eyeballs.

Private Consumption Recovery- Particularly in urban India owing to higher festive demand and disposable incomes.

All together, these are keeping India’s real GDP growth trajectory well above global averages, and will make it one of the two fastest-growing mega-economies in 2025–26.

💱 The Rupee Predicament: Why the Currency Is Falling

The rupee remained under pressure against the US dollar despite the economic gathering more pace staying at around ₹84–85 per USD. Here’s why:

Increasing Prices of Crude Oil: India buys more than 80% of its oil. Rising prices push dollar demand.

U.S. Fed Policy: Bullish cues from the Fed helps USD strengthen versus the world, implies weaker emerging market currencies including INR.

Trade Deficit Worries: Strong imports (particularly electronics and crude) are broadening deficit on current account.

Capital Outflows: FIIs continue to be cagey in view of global fears, and are net sellers in Indian equity and bond markets.

🔍 What It Means for You

Investors

Investors in the equity markets should do well, particularly in infrastructure, banking and manufacturing.

But currency volatility could have an impact on foreign investment inflows, and global fund performance (if you’re a global mutual funds or ETFs investor).

Importers & Exporters

Importers (especially in oil, electronics and luxury goods) could see prices pushed up by higher costs.

Export oriented sectors may gain with rupee depreciation translating into higher earnings in INR terms (for example IT and pharma).

Consumers

Prices for imported goods — electronics, fuel, gold — could rise with inflation.

Travel and education expenditures abroad become more expensive, affecting the spending of the outbound students and tourists.

Loan & FD Rates

RBI might stick to a neutral to tightening policy in a bid to arrest any rupee slide.

There may not be a big cut in EMIs for borrowers; depositors may have to contend with low interest.

✅ Conclusion: Stepping through the Tug-of-War

India’s economic fundamentals look strong and bullish, still some complication due to currency depreciation. In FY26, success is the other side of the same coin:

Remain invested in India’s growth story, particularly in domestic-focused sectors.

I know many hedges currency exposure if they invest internationally.

Financial should diversify their assets—equity, debt, gold, real estate to overcome the currency and inflation risks.