India's FY26 growth prospects remain resilient but global trading risks, says rating agencies | Mint

New -Delhi: The economic growth of India is expected to remain resilient during the FY26, supported by sustained government spending and a possible revival in private investment, several rating agencies said in their FY25 rating assessments released on Tuesday, but warned against the risks of increasing US rates. India Ratings & Research, a Fitch group business, said it expected the economy to grow by 6.6% in FY26, but warned that rating actions could moderate during the financial year. Grading actions involve all changes made by a credit rating agency, including initial assignments, revisions, outlook, suspensions and withdrawals. According to the rating agency, sectors such as Power, Auto and Auto Components, road infrastructure, consumer services and healthcare over the past four years have performed well with rating upgrades, powered by the government led, and strong urban demand. Read also | When will Global Credit Rating Agencies make their judgments about India? The improvement of rural consumption, supported by higher disposable income, has further increased the service sector. However, textiles, construction and capital goods faced downward rating actions due to the volatility of the raw material and the rising working capital pressure. During the FY25, India Ratings upgraded 330 issuers of debt while downgrading 94. “Healthy domestic consumption demand amid an increase in rural demand, the continued focus on the government has supported strong economic growth on spending on spending the spending of the Capeex and the strongest services growth,” said India Ratings & Research in its corporate credit profile FY25 report. “Macro economic instability of bags with slowdown in demand, rising criminals in retail credit, and uncertainties from the US tariff increases in the last quarter limited the momentum … which develops the landscape of the tariff war, and the possible resulting impact on credit profiles has a cautious tone,” it added. The domestic demand to strengthen in the meantime, Crisil Ratings said in its H2, FY25 ratings, that the credit quality prospects for Indian firms are expected to be positive for FY2026, as domestic demand is expected to strengthen in three key sectors of the economy – capital goods, construction and retail. On the upcoming US reciprocal rates that come into effect from April 2, Crisil Ratings, except smartphones, expect to see a low to moderate impact on their business risk profiles, as strong corporate balance sheets will provide sufficient space to absorb this impact without affecting credit quality. A 25% US-US tariff on steel, aluminum and autocomponents is expected to have a moderate impact, although direct US dependence on the US market is low, the rating agency said. Crisil Ratings said that as many as 409 upgrades and 228 downgrades were recorded during the domestic companies period, with the credit ratio that was 2.64 times during H2, FY25, a little lower than 2.75 times in the first half. “Corporate India will benefit from the urban consumption attack powered by budget tax cuts, inflation alleviation and the expected reduction in interest rates,” says Subodh Rai, managing director, Crisil Ratings. “Furthermore, steadfast spending on infrastructure will have a positive multiplier effect and support sectors,” he added. The export of goods may be modest according to the Rating Agency ICRA, the Tepidness in India’s export of merchandise is expected to continue in the short term amid the ongoing tariff devices with the export of services that are likely to exceed the growth of merchandise. During FY24, the exports of India merchandise amounted to approximately $ 427 billion, down 3.1% annually, while imports amounted to approximately $ 678 billion annually, according to the data from the Ministry of Trade and Industry. Indian rates are relatively high compared to many other countries. According to the World Trade Organization, India’s ‘most beneficiary nation or an MFN-applied trade-weighted average tariff rate’ is at 12%. By comparison, the rate for others is as follows: Korea (8.4%), Brazil (6.7%), Indonesia (5.3%), China (3.0%), Mexico (3.9%), the EU (2.7%), Canada (3.4%) and the US (2.2%). “Although the rates of the production vary, the comparison above provides a simplified view of the tariff differences between India and the US. Given the possibility of reciprocal rates being charged by the US (as done on other countries), Indian exporters will have to navigate to make the adjustments of the trade flow,” ICRA said. “In addition, the US tariff actions are likely to exert downward pressure on the INR against the USD, which could partially compensate the impact on export income in INR terms,” ​​he added. ICRA said although total consumption growth behind the GDP growth in FY23 and FY24 has deteriorated, the Uptick in FY25 was mostly driven by rural demand, with the growth of urban demand that remains modest. However, the recovery is expected in FY26 with tax relief announced in the annual budget, lower food inflation, rate cuts and other relatives, the rating agency added. Global uncertainty could affect the private captex the imposition of US rates could disrupt the export-driven sectors, especially those relying on discretionary spending, leading to increased pricing competition of other economies affected, said Sachin Gupta, executive director and chief judging officer at CareEng. The clear signals come up. “That said, not everything is gloomy agreements and depreciation of the rupee can provide much-needed relief to exporters. At the same time, corporate India’s strong, fraudulent balance statements serve as a solid shield against external volatility,” Gupta added. The CareEdge Ratings credit ratio improved to 2.35 times in H2 FY25, from 1.62 times in H1 FY25, with 386 upgrades and 164 downgrades during the period. Read also | India needs a stronger rating to join $ 29.5 tn Global Bond Index: FTSE Russell captures all the business news, economy news, the news reports and online updates on live mint. 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