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The conventional logic (and probably simplest method) is to plug the hole then redrill it. Get a 1-3/4" hole saw, cut a plug from scrap wood, glue it in place. Scribe the center carefully, come back after the glue has set up hard and drill the 2" hole as if it was new wood.
If you get them from a lubberly hardware store, the drill-saws shouldn't be expensive. The cheap ones are designed for cutting wood and will do quite well enough, the expensive ones are for installing lock sets in steel-jacketed doors or for commercial use, and hopefully you won't be making THAT many holes in the boat.
Of course if you prefer elbow grease, you can use a sanding wheel with coarse paper, or a wood rasp, and just chew out the existing hole 1/8" deeper in all dimensions. But that won't quite be round, unless you're a very very good worker.
Expect surprises--like wood core that may need sealing. And if you drill through from the OUTside instead of the inside, you'll get a cleaner cut in the gelcoat on the bottom.