Aluminum-water combustion based hydro-reactive jet propulsion system shows higher theoretical propulsive performance when compared to the conventional solid rockets for high-speed underwater vehicles such as modern supercavitating torpedoes. It does not require the onboard oxidant. So, its specific impulse is much higher than a conventional rocket engine. The performance of a water-breathing ramjet engine is to be established in the present work. Aluminum at micro-scale shows adequate ignition performance and combustion efficiency only at very higher temperatures. Nano-aluminium is expected to alleviate this problem as smaller aluminum particles ignites at significantly lower temperatures. In this study, aluminized fuel-rich propellant compositions contain 40-50% of aluminum with the average particle sizes of 18 µm, 250 nm and 100 nm, and also comprise 34.5-46% of Ammonium Perchlorate (AP) are tested over a pressure range of 0.2–3.1 MPa in CO2 atmosphere. Paraffin wax and Hydroxyl-terminated Polybutadiene (HTPB) based binders are used for the preparation of the nano and micro aluminized propellants respectively. Ultra-fine iron oxide (UFIO) is used as a burning rate catalyst. Theoretical propulsive performance calculation using CEA show that the increasing of total water/fuel ratio and aluminum content in the solid fuel can promote the engine performance. Theoretical Isp is ascertained with the higher metal content in the fuel-rich propellants. By comparing with Magnesium (Mg) and Aluminum (Al) based propellants, a water ramjet powered using Boron (B)-based propellant shows higher theoretical specific impulse for a ratio of water to fuel greater than 1.The new highly-aluminised propellants are to be tested in a scaled-down experimental water ramjet engine to find the factors influencing the engine performance. The optimum water fuel-ratio, methods of water injection and thrust augmentation are to be determined.