Indian Rupee Sees Moderate Support from Domestic Growth

Commerzbank strategists say India's resilient domestic growth is supporting the Indian Rupee (INR) against the US Dollar. The Reserve Bank of India (RBI) projects a moderation to 6.7% for FY2026-27 compared to 7.7% for the previous fiscal year, with inflation contained at 5.0%. Industrial production and investment activity are key drivers of growth, which is expected to remain firm this year despite earlier concerns over the weaker monsoon.

The Bloomberg consensus expects a 7.3% yoy growth in Q2 GDP, down from 7.8% in Q1. Investment activity remains strong, with capital goods production expanding by double digits and government infrastructure spending ongoing. RBI is comfortable holding off on additional monetary accommodation, reducing pressure to provide support.

In the near term, USD/INR is likely to be driven by oil prices, broader US Dollar direction, and RBI intervention rather than domestic growth alone. The pair remains close to the 95 level, with consolidation expected between 94-96 in the near term. A stronger-than-expected Q2 GDP print could reinforce the case for RBI to remain on hold and provide some support to INR.