Domestic Demand Keeps India Inc Afloat

Corporate India looks set to enjoy another year of solid growth. A new report by Crisil, a domestic rating agency, projects that revenue will climb by 8% in the current fiscal year, powered by resilient domestic consumption and an infrastructure splurge by the government. That momentum, however, will be tested by fresh tariff measures from America, which threaten to squeeze exporters in industries from diamonds to seafood.

Margins, though, look sturdy. Crisil estimates that EBITDA margins will hover at around 12%, thanks to easing inflation, lower interest costs and recent tax reliefs. ‘Rationalisation of GST rates, income tax relief, lower inflation and reduced interest costs are set to boost consumption,’ notes Somasekhar Vemuri, a senior director at Crisil Ratings. Companies, moreover, have the balance-sheet strength to weather turbulence: leverage levels remain at their lowest in a decade, leaving ample room for manoeuvre if global headwinds gather force.

Banks and non-banks, too, seem in good health. Credit growth at banks should touch 11–12% this year, a tick higher than last, while non-banking finance companies are expected to keep assets under management growing at around 18%. Lower interest rates and tax breaks should feed further credit expansion in the year’s latter half.

The optimism extends across several industries. Builders are busy with roads, irrigation and power projects. Infrastructure assets, from solar farms and highways to commercial property and data centres, are drawing steady cash flows. Hoteliers are cashing in on surging leisure and business travel. Consumer-goods firms, meanwhile, benefit from premiumisation trends and softer inflation.

Still, the global picture is less benign. America absorbs a fifth of India’s merchandise exports; its tariff moves are pinching exporters of gems, jewellery and shrimp. The diamond trade, already under siege from lab-grown competitors, faces tighter margins. Shrimp exporters, despite strong orders early in the fiscal, expect sales to dip as American demand cools.

For now, though, India’s economy is cushioned by the domestic engine. So long as households keep spending and the government keeps building, the corporate sector’s foundations look firm, even if foreign seas get choppier.