Is India's Corporate Credit Profile Resilient Amid Global Uncertainties?
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Synopsis
The resilience of India's corporate credit profile amidst global uncertainties is noteworthy. Despite challenges posed by US tariffs and geopolitical tensions, the domestic economy remains robust, supported by favorable local consumption trends and a revised GDP growth forecast.
Key Takeaways
- Indian corporate credit profile shows resilience
- Domestic consumption is expected to rise
- ICRA upgrades GDP growth forecast to 6.5%
- US tariffs pose risks to exports
- Domestic private consumption contributes 57% to GDP
New Delhi, Sep 30 (NationPress) In the face of ongoing global challenges, including tariff disruptions and geopolitical tensions, the credit profile of Indian corporations has shown remarkable resilience, according to a report released on Tuesday.
The domestic-focused nature of the Indian economy is expected to limit the broader macro impact from elevated US tariffs.
ICRA Ratings noted, "Domestic consumption is set to receive a boost from GST rate rationalization, income tax relief, the transmission of rate cuts, and easing food inflation, particularly benefiting urban demand, which has seen uneven recovery thus far."
The imposition of a steep 50 percent tariff on Indian exports to the United States poses a significant challenge for exporters, particularly in sectors like cut and polished diamonds (CPD), textiles, and seafood, which heavily depend on the US market.
In light of these positive domestic trends, ICRA has revised its GDP growth forecast for FY2026 upward by 50 basis points to 6.5 percent, helping to cushion the adverse effects of the US tariffs, stated K. Ravichandran, Executive Vice President and Chief Rating Officer, ICRA.
The possible extension of protectionist measures to the services sector remains a critical concern. If enacted, the proposed HIRE Act could significantly disrupt India’s outsourcing industry due to its substantial reliance on the US market, he added.
During the first half of the current fiscal year (H1 FY2026), ICRA upgraded the ratings for 214 entities while downgrading 75, resulting in a robust Credit Ratio of 2.9 times.
The upgrades in H1 FY2026 were primarily driven by entity-specific factors such as improved business fundamentals, strengthening of the parent’s credit profile, and reduced project risks in sectors including power and roads.
Key business drivers involved market share expansion, order book growth, operational leverage from scale, and favorable shifts in product mix and cost structures.
According to the report, the 50 percent tariffs imposed by the US on Indian exports pose a considerable risk to India’s merchandise trade in the future.
Considering that the US accounts for nearly 20 percent of India’s exports, with 50–60 percent of these now vulnerable, merchandise exports could decrease by approximately 4–5 percent YoY in FY2026 if the higher tariffs continue through March 2026.
Despite the external challenges, the overall impact on the Indian economy is anticipated to remain limited due to its domestic-oriented nature, with exports to the US constituting only 2 percent of GDP, added Ravichandran.
Domestic private consumption, which contributes 57 percent to GDP, is expected to receive a boost from the recent GST rate rationalization, likely enhancing affordability and stimulating household spending.
Point of View
It's vital to highlight that while external challenges are significant, India's robust domestic consumption framework and strategic economic policies are proving effective in bolstering corporate credit profiles. This resilience offers hope and stability in uncertain times, a narrative that the nation must embrace.
NationPress
30/09/2025
Frequently Asked Questions
What are the main challenges facing Indian exporters?
Indian exporters are facing challenges primarily due to the **50 percent tariffs imposed by the US** on various goods, particularly affecting sectors like textiles and seafood.
How is domestic consumption expected to impact India's economy?
Domestic consumption, which contributes **57 percent** to GDP, is expected to receive a boost from initiatives like GST rationalization and income tax relief, enhancing affordability for households.
What is ICRA's revised GDP growth forecast for FY2026?
ICRA has revised its GDP growth forecast for FY2026 upward by **50 basis points to 6.5 percent**, reflecting positive domestic economic trends.
How many entities did ICRA upgrade during H1 FY2026?
During the first half of FY2026, ICRA upgraded the ratings of **214 entities**, demonstrating a positive outlook for corporate credit.
What is the significance of the HIRE Act for India's outsourcing industry?
The proposed HIRE Act could disrupt India's outsourcing industry significantly, as it poses potential restrictions that could affect a sector heavily reliant on the US market.
