Indian corporates weather global headwinds with record credit strength: ICRA
Mumbai: India Inc.’s credit profile has demonstrated remarkable resilience despite escalating global trade tensions and geopolitical uncertainties, according to data released by rating agency ICRA for the first half of the fiscal year 2026 (H1 FY2026).
ICRA’s rating actions during the period underscored the strength of corporate balance sheets and a supportive domestic economy. The agency recorded 214 rating upgrades against only 75 downgrades, resulting in a robust credit ratio of 2.9. This marks a significant improvement over the 2.0\text{x} recorded in the full FY2025 and is the highest such ratio reported in the first half of a fiscal year.
Domestic Strength to Counter US Tariff Threat
The optimistic rating trend comes even as Indian exporters face a major challenge from the United States' recent imposition of a steep 50% tariff on Indian exports.
K. Ravichandran, Executive Vice President & Chief Rating Officer, ICRA, commented on the situation: "The imposition of steep 50% tariff on Indian exports to the US presents a significant challenge for exporters, particularly in sectors such as cut & polished diamonds (CPD), textiles, and seafoods, which are heavily reliant on the US market."
The tariffs, which put approximately 50%–60% of India's exports to the US at risk, could cause merchandise exports to contract by an estimated 4%–5% year-on-year in FY2026, potentially widening the current account deficit (CAD) to around 1.2% of GDP. The Indian Rupee's recent drop to a record low of 88.8 against the US dollar in September 2025 further highlights the external pressure.
However, the "domestic-focused nature of the Indian economy is expected to limit the broader macro impact," Ravichandran noted. Due to this resilience, ICRA has revised its GDP growth forecast for FY2026 upward by 50 basis points to 6.5%, helping to cushion the adverse effects of the tariffs.
Upgrade Drivers and Corporate Health
Rating upgrades in H1 FY2026 were largely driven by entity-specific improvements, including market share expansion, robust order books, operating leverage, and stronger parent company profiles. Industrially, the power, realty, and hospitality sectors, which together comprise a quarter of ICRA’s portfolio, contributed to half of the total upgrades.
Corporate financial health remains strong, with the aggregate Total Debt-to-OPBDITA ratio declining significantly from 3.4\text{x} in March 2016 to 2.1 in March 2025. Furthermore, liquidity has improved, with cash and current investments relative to total debt rising from 32\% to 46% over the same period.
"Despite a strong 13% CAGR in capex over the past five years, higher operating cash flows have helped reduce reliance on debt and strengthen liquidity," the report stated.
Consumption and Infrastructure to Drive Future Growth
Looking ahead, domestic private consumption, which accounts for approximately 57% of GDP, is poised for a boost. Recent GST rate rationalisation, income tax relief, easing food inflation, and the transmission of interest rate cuts are expected to stimulate household spending and aid the uneven recovery of urban demand.
In the financial sector, bank credit is projected to grow by 10.4%–11.3% year-on-year, while NBFC credit is expected to expand by 15%–17%.
While the sustained focus on infrastructure development and firm rural demand are set to remain the primary growth drivers, Ravichandran cautioned that the subdued export outlook and import concerns are "likely to delay a broad-based revival in the private investment cycle." He also highlighted that the potential extension of protectionist measures, such as the proposed HIRE Act in the US, to the services sector remains a key monitorable due to the Indian outsourcing industry's high reliance on the US market.
ICRA’s rating actions during the period underscored the strength of corporate balance sheets and a supportive domestic economy. The agency recorded 214 rating upgrades against only 75 downgrades, resulting in a robust credit ratio of 2.9. This marks a significant improvement over the 2.0\text{x} recorded in the full FY2025 and is the highest such ratio reported in the first half of a fiscal year.
Domestic Strength to Counter US Tariff Threat
The optimistic rating trend comes even as Indian exporters face a major challenge from the United States' recent imposition of a steep 50% tariff on Indian exports.
K. Ravichandran, Executive Vice President & Chief Rating Officer, ICRA, commented on the situation: "The imposition of steep 50% tariff on Indian exports to the US presents a significant challenge for exporters, particularly in sectors such as cut & polished diamonds (CPD), textiles, and seafoods, which are heavily reliant on the US market."
The tariffs, which put approximately 50%–60% of India's exports to the US at risk, could cause merchandise exports to contract by an estimated 4%–5% year-on-year in FY2026, potentially widening the current account deficit (CAD) to around 1.2% of GDP. The Indian Rupee's recent drop to a record low of 88.8 against the US dollar in September 2025 further highlights the external pressure.
However, the "domestic-focused nature of the Indian economy is expected to limit the broader macro impact," Ravichandran noted. Due to this resilience, ICRA has revised its GDP growth forecast for FY2026 upward by 50 basis points to 6.5%, helping to cushion the adverse effects of the tariffs.
Upgrade Drivers and Corporate Health
Rating upgrades in H1 FY2026 were largely driven by entity-specific improvements, including market share expansion, robust order books, operating leverage, and stronger parent company profiles. Industrially, the power, realty, and hospitality sectors, which together comprise a quarter of ICRA’s portfolio, contributed to half of the total upgrades.
Corporate financial health remains strong, with the aggregate Total Debt-to-OPBDITA ratio declining significantly from 3.4\text{x} in March 2016 to 2.1 in March 2025. Furthermore, liquidity has improved, with cash and current investments relative to total debt rising from 32\% to 46% over the same period.
"Despite a strong 13% CAGR in capex over the past five years, higher operating cash flows have helped reduce reliance on debt and strengthen liquidity," the report stated.
Consumption and Infrastructure to Drive Future Growth
Looking ahead, domestic private consumption, which accounts for approximately 57% of GDP, is poised for a boost. Recent GST rate rationalisation, income tax relief, easing food inflation, and the transmission of interest rate cuts are expected to stimulate household spending and aid the uneven recovery of urban demand.
In the financial sector, bank credit is projected to grow by 10.4%–11.3% year-on-year, while NBFC credit is expected to expand by 15%–17%.
While the sustained focus on infrastructure development and firm rural demand are set to remain the primary growth drivers, Ravichandran cautioned that the subdued export outlook and import concerns are "likely to delay a broad-based revival in the private investment cycle." He also highlighted that the potential extension of protectionist measures, such as the proposed HIRE Act in the US, to the services sector remains a key monitorable due to the Indian outsourcing industry's high reliance on the US market.
Next Story