NEW DELHI: A confluence of steady GDP growth, anticipated interest rate cuts in 2025, and a healthier banking sector is expected to create a supportive environment for corporate credit in India during FY26, Fitch Ratings said in its latest update on ‘India Corporates Credit Trends.’
The ratings agency highlighted that improved access for corporate credit would be driven by widening EBITDA margins and steady demand across critical sectors, even amid high capital expenditure intensity.
Key drivers
Fitch anticipates the Reserve Bank of India (RBI) will cut rates in 2025, following last month’s 50-basis point reduction in the cash reserve ratio (CRR), further easing liquidity.
India’s GDP is forecasted to grow at 6.5 per cent in FY26, supported by robust infrastructure spending. This will fuel demand for cement, electricity, petroleum products, steel, and engineering. The improved financial health of India’s banking sector will enhance the flow of credit to corporates, supporting business expansion and operational efficiency.
Sector-wise credit outlook
Fitch believes revenue for upstream and marketing companies in the oil & gas sector will face headwinds due to lower prices, though modest volume growth will offset some of the decline.
In IT Services, sales growth is projected to remain in mid-single digits as global clients curb discretionary spending amid economic uncertainties. Auto suppliers will see slower growth, while chemical companies face continued pressure from global oversupply.
Likewise, tariff hikes will sustain telecom revenue growth, while pharmaceuticals will benefit from their non-discretionary nature and favorable industry trends. On the travel and tourism front, recovery is expected to progress, though at a measured pace.
Risks to watch
Fitch warns that rising energy prices, a weakening rupee, or adverse trade measures could pose downside risks to corporate credit metrics.
Despite these challenges, the overall outlook remains positive, with supportive macroeconomic factors laying a robust foundation for access to corporate credit and drive growth in FY26.
