Abhishek Sinha
30 September 2025
India Inc’s credit quality continues to show resilience, supported by robust domestic growth and government-led infrastructure spending, even as export-linked sectors face pressure from US tariffs and global economic headwinds.
According to Crisil Ratings, the credit ratio—the proportion of rating upgrades to downgrades—stood at 2.17 times in the first half of FY26, compared with 2.75 times in the same period last fiscal.
Strong Upgrade Momentum in Infrastructure
Between April and September 2025, there were 499 rating upgrades against 230 downgrades. The reaffirmation rate remained high at ~80%, highlighting the stability of corporate India.
The upgrade rate of ~14% outpaced the 10-year average of ~11%, led primarily by infrastructure and allied sectors such as:
- Construction and engineering
- Roads and renewables
- Capital goods
- Secondary steel
Nearly 45% of the upgrades came from these segments, driven by government capital expenditure, timely project completions, and healthy revenue visibility.
Pressure on Export-Linked Sectors
The downgrade rate stood at 6.4%, broadly in line with the long-term average. However, export-oriented industries bore the brunt of US tariffs and weaker global demand. These included:
- Diamond polishers – hit by shrinking demand and competition from lab-grown diamonds
- Shrimp exporters – facing steep revenue declines due to higher competition
- Home textile makers – witnessing reduced orders amid US supply chain shifts
By contrast, sectors with lower US dependence such as readymade garments, pharmaceuticals, and chemicals are relatively insulated.
Domestic Tailwinds Support Growth
Several macro factors are expected to further bolster credit quality in the coming months:
- Tax relief and GST rationalisation improving consumption
- Lower inflation and reduced interest costs supporting household demand
- Steady government capex driving infrastructure momentum
Key beneficiaries include:
- Construction: diversified order books in roads, power, water and irrigation projects
- Infrastructure assets: renewable energy, commercial real estate, and data centres with predictable cash flows
- Hospitality: rising demand from business and leisure travel
- FMCG: strong consumer appetite, easing inflation, and premiumisation trends
Outlook for Financial Sector
Crisil expects credit growth in the banking sector at 11–12%, slightly higher than last fiscal, while non-banking finance companies (NBFCs) are likely to sustain AUM growth of ~18%.
Asset quality is expected to remain stable, though vulnerabilities persist in export-linked MSMEs, unsecured loans, and the microfinance segment.
Corporate India’s Financial Strength
According to Somasekhar Vemuri, Senior Director, Crisil Ratings:
“Favourable domestic consumption and steady infrastructure capex will bolster cash flows. Revenue growth is expected to sustain at ~8% this fiscal, while EBITDA margins remain steady at ~12%. With leverage at a decadal low of ~0.5x, corporate India has the flexibility to withstand global headwinds.”
While global trade tensions may weigh on certain sectors, potential bilateral agreements with the US and EU and continued policy support could offset risks.
✅ Bottom Line: Despite global uncertainties, India Inc’s credit outlook remains robust, with domestic demand and infrastructure spending providing a strong buffer against external shocks.
