India Inc can weather 50 bps rate hike, El Nino unlikely to dent rural demand: Crisil

New business data points to the fact that India Inc will not be impacted even if the Reserve Bank delivers the widely anticipated 0.50 percentage point interest-rate gain in the remainder of the calendar year, a domestic credit rating agency stated on Wednesday.

The El Nino-led rainfall shortfall is additionally unlikely to dent rural demand, Crisil Ratings stated, pointing out that non-crop incomes account for over 40 per cent of agricultural output and the policy measures will additionally be of help.

The geopolitical upheveal caused by the US-Israel aggression in the Middle East is additionally unlikely to hurt corporate India, the agency stated, giving a stable outlook to credit performance in the future.

Even as the war continued, the agency stated that the 'credit ratio', which is the number of upgrades to downgrades in its portfolio of 7,200 firms, increased in the first six months of FY27.

The credit ratio came at 2.18 times for H1FY27 as against 1.5 times in H2FY26, which represents an improvement in the overall credit quality, it stated.

Subodh Rai, the managing director of the agency, stated stress tests run by the agency have reduced the number of sectors impacted by the geopolitical tensions to three from six at the start of the fiscal.

He stated diamond polishers, specialty chemicals and polyester textiles keep be at risk because of the war, while others including airlines, ceramics and flexible packaging have noted an upgrade to 'stable' in their respective credit quality outlook.

The gross non-performing assets ratio for banks can gain marginally to between 1.9-2 per cent by the end of the fiscal yearfrom 1.8 per cent in the year-ago period, it stated.

"A interest-rate gain scenario of even up to 50 basis points (bps) appears largely manageable for India Inc," its chief criteria officer Somasekhar Vemuri told reporters, adding that corporate India is cushioned by its structural strengths including delevraged balance sheets.

The weak monsoon is a key monitorable going forward, the agency stated, adding that it may impact tractor manufacturers and microlenders. That stated, Rai stated that it is unlikely to impact the rural demand in the economy.

"The agency pegged the overall credit expansion for the banking system to come at up to 15.5 per cent led by firm expansion from the small businesses and retail lending verticals. Corporate credit expansion, which has witnessed a jump in recent past, will get a further leg up from bond market substitution theme if RBI hikes its interest rates," Vemuri stated.

Diaspora deposits boosted recently are likely to put pressure on the bank margins, but the same will not hurt the overall earnings ratios, it stated.

Among other credit rating agencies, India Ratings stated India Inc is navigating global disruptions with resilience, and stated that the April-September period saw 190 upgrades as against 63 downgrades in its rated universe.

"Strengthened corporate balance sheets, supported by resilient consumption demand, continued government capital spending, and calibrated private-sector investments, have underpinned Corporate India's credit stability," it stated.

Peer rating agency Icra stated the credit ratio for its universe came at 3.2 times, which is more than double of the 10-year average of 1.5 per cent.

"Looking ahead, elevated oil price marks, deficient monsoon rainfall and rising inflation are anticipated to moderate consumption expansion, particularly across rural-linked and discretionary sectors," its chief rating officer K Ravichandran stated.

Careedge Ratings stated its credit ratio nearly doubled to 3.95 times in H1FY27 on the back of 300 upgrades and 76 downgrades during the six months.

"Buoyant consumption, a pickup in investment, a healthy external position and India Inc's leaner balance sheets give us confidence in the resilience of the Indian economy looking ahead in fiscal 2027," its chief rating officer Sachin Gupta stated.