India Inc entered the second half of FY27 with strong credit profiles despite a moderation in rating activity, according to rating agency Icra’s credit outlook. The credit ratio, which measures rating upgrades against downgrades, stood at 3.2 times in H1 FY27, improving from 2.8 times in H1 FY26 and 3.1 times in FY26. The ratio remained above its 10-year average of 1.5 times, indicating resilience in corporate credit quality. Icra said the annualised upgrade rate moderated to 14 per cent from 17 per cent in FY26, while the annualised downgrade rate fell to a multi-year low of 4 per cent. The agency attributed upgrades to stronger business profiles, improved parent credit profiles, lower project risks and deleveraging through equity infusion and scheduled debt repayments. Power, real estate, auto components, finance and capital goods together contributed around half of all upgrades. Power-sector upgrades were concentrated in renewable energy, supported by lower execution risks and improved operating performance, while real estate companies benefited from higher occupancy, residential sales and collections. Auto component companies gained from sustained demand and improved operating leverage, while capital goods firms benefited from larger order books and demand from sectors including defence, power and data centres. However, Icra expects headwinds to moderate economic growth in the second half of FY27. Renewed escalation in West Asia has pushed the Indian crude basket to $116 per barrel in September 2026, 68 per cent above its pre-conflict level. Higher energy and commodity costs, along with rupee depreciation, could pressure corporate margins and household purchasing power. A 12 per cent monsoon rainfall deficit and lower reservoir storage are raising concerns over agricultural output and rural demand. Icra expects agricultural GVA growth to slow to around 1 per cent in FY2027 from 3.3 per cent in FY2026. Retail inflation is projected to average 5 per cent in FY2027, compared with 2.1 per cent in FY2026, while the agency expects two 25-basis-point repo rate hikes in October and December if crude prices remain elevated. Icra expects GDP growth to moderate to 7.1 per cent in FY2027 from first-quarter growth of 7.8 per cent. Rural-linked sectors such as tractors, two-wheelers and fast-moving consumer goods could see slower volume growth, while discretionary segments including automobiles, consumer durables, fashion retail, travel and quick-service restaurants may face softer demand. Export-oriented sectors face uncertainty from potential US tariffs, particularly if measures targeting buyers of Russian oil affect Indian exports. Generic pharmaceuticals face additional tariff risks under a US proposal, although the extended implementation timeline and Indian companies’ US manufacturing presence could provide mitigation. Despite these challenges, Icra expects corporate balance sheets and liquidity buffers to prevent broad-based credit stress, leaving India Inc positioned to absorb near-term pressures and maintain overall credit resilience.
Crude, Inflation and Tariffs Pose Risks as India Inc Enters H2 FY27
