Mumbai, April 1 (NationPress) The credit profile of India Inc demonstrates resilience, bolstered by domestic policy initiatives and robust corporate balance sheets. However, the pivotal question arises: will these domestic factors be adequate to sustain credit quality if the global climate worsens? A report released on Wednesday highlights this concern.

In light of the evolving geopolitical landscape, India's credit ratio for the manufacturing and services sector has improved to 2.06 times in the latter half of FY26, an increase from 1.72 times in the first half. Similarly, the Banking, Financial Services, and Insurance (BFSI) sector saw an improvement in its credit ratio, climbing to 2.25 times from 2.10 times in H1 FY26, marking a recovery from the lows seen in H2 FY25.

According to CareEdge Ratings’ Credit Ratio, which assesses the ratio of rating upgrades to downgrades, it stood at 1.93 times in the second half of fiscal 2026, down from 2.56 times in the first half.

Throughout this period, there were 363 upgrades and 188 downgrades. While the credit ratio remains above the 10-year average of 1.55, this decline indicates early signs of stress in a more challenging landscape.

Despite these fluctuations, the rate of reaffirmations remains impressively high at 80 percent, suggesting that the majority of the rated entities are maintaining stability, even as external complexities increase, as per the findings.

“CareEdge projects that if crude oil averages $100 per barrel in FY2027, GDP growth could slow to 6.5 percent, while inflation may rise to 5.1–5.3 percent,” stated Sachin Gupta, Executive Director and Chief Rating Officer, CareEdge Ratings.

While domestic policies and stronger corporate balance sheets provide some protection, the fundamental question remains whether these factors can sustain credit quality amid a deteriorating global landscape.

“Currently, the outlook is cautiously optimistic — but the margin for safety is diminishing,” he emphasized.

The upgrades during H2 FY26 were broad-based, with significant contributions from key sectors such as pharmaceuticals, auto ancillaries, real estate leasing, mid-sized capital goods entities, agricultural food products, as well as hospitality and healthcare within the services sector.

“Looking forward, the recent outbreak of conflict in West Asia has introduced sectoral vulnerabilities previously absent. Industries such as airlines, ceramics, chemicals, glass, fertilizers, oil marketing, basmati rice exporters, packaging, tyres, synthetic textiles, gas distribution, cement, paints, semiconductors, electronics, auto ancillaries, and hospitality may face earnings challenges if the West Asia conflict persists,” explained Ranjan Sharma, Senior Director, CareEdge Ratings (Corporate Ratings).

In the infrastructure sector, the credit ratio normalized to 1.67 times in H2 FY26, down from an inflated 8.54 times in H1 FY26. This adjustment reflects the base effect — the first half had been significantly boosted by a series of bulk portfolio rating actions, including transitions to stronger sponsors and mass transfers to Infrastructure Investment Trusts, which were extraordinary in nature.

If the global conflict escalates and trade flows continue to shift, the durability of credit profiles will face significant challenges in the coming months, according to the report.