Domestic policy measures and stronger corporate balance sheets are providing some support to India Inc’s credit profile. The key concern is whether these internal factors can maintain credit quality if the global situation worsens. In the second half of FY26, the credit ratio for the manufacturing and services sector in India increased to 2.06 times from 1.72 times in H1 FY26.
CareEdge Ratings’ Credit Ratio, which gauges rating upgrades to downgrades, was 1.93 times in the latter half of fiscal 2026, down from 2.56 times in the first half. This period saw 363 entities upgraded and 188 downgraded, with reaffirmations at 80 percent. Despite the moderation, the credit ratio remains above the 10-year average of 1.55, hinting at early signs of stress in a more challenging environment.
If crude oil averages $100 per barrel in FY2027, GDP growth could slow to 6.5 percent, with inflation rising to 5.1–5.3 percent, according to Sachin Gupta, Executive Director of CareEdge Ratings. The recent upgrades were diverse, with sectors like pharmaceuticals, auto ancillaries, real estate leasing, and mid-sized entities in capital goods and agriculture driving the momentum.
The outbreak of conflict in West Asia has introduced sectoral vulnerabilities, impacting industries such as airlines, ceramics, chemicals, and oil marketing companies. In infrastructure, the credit ratio normalized to 1.67 times in H2 FY26 from 8.54 times in H1FY26, primarily due to base effects. The report warns that if global conflict deepens and trade flows restructure, credit profiles will face significant challenges ahead.
