India’s corporate credit profile remains broadly healthy, but rising input costs and external uncertainty could create pressure for some businesses, ICRA Group CEO Ramnath Krishnan said in an interview published by The Economic Times on November 9.
Krishnan attributed the strength in part to companies reducing debt and improving liquidity after the pandemic. ICRA continues to see roughly three rating upgrades for every downgrade, he said.
That ratio is a broad indicator of credit-rating movement, not a guarantee that every company or sector is in strong shape.
Stronger balance sheets, uneven pressures
Krishnan said corporate balance sheets have benefited from a period of deleveraging. Many companies entered the current period with more liquidity and stronger credit profiles than they had during earlier economic stress.
Some sectors face more difficulty. The interview identifies chemicals, airlines, gems and jewellery, and oil and gas refining as areas exposed to geopolitical developments and cost pressures.
Businesses can be affected by changes in oil prices, freight charges, borrowing costs and the rupee’s value. The impact varies by company, depending on how much it relies on imported materials or foreign-currency borrowing, and whether it can pass higher costs on to customers.
Inflation and energy costs are key variables
Krishnan said the impact on corporate credit would depend partly on how long geopolitical tensions continue. He cited ICRA forecasts of about 9% for wholesale price inflation and 5% for consumer price inflation, and said sustained crude prices around or above $100 a barrel would add pressure.
Those figures are forecasts, not outcomes. Energy prices can change quickly, and the effect on companies depends on their business models, contracts and ability to manage costs.
Higher expenses can squeeze margins when companies cannot raise prices enough to offset them. A weaker rupee may add further pressure for businesses with significant foreign-currency exposure.
Investment remains cautious
The interview also points to muted private-sector capital spending outside areas such as infrastructure, power, ports and cement. Krishnan said companies have been reluctant to commit large sums while demand remains uncertain.
That caution matters because investment can support future growth and productivity. Businesses may delay expansion until they have clearer expectations about customer demand and economic conditions.
At the same time, cautious investment can be a response to uncertainty rather than a sign of immediate financial distress. Companies with strong balance sheets may be able to wait, while highly leveraged firms or those facing sharp cost increases could be more exposed.
Reading the outlook
The overall picture described by ICRA is one of resilience with risks concentrated in certain sectors. Stronger liquidity and debt reduction provide a buffer, but they may not protect every company from persistent inflation, fuel costs or currency movements.
For investors and businesses, the key indicators to watch include credit upgrades and downgrades, borrowing costs, commodity prices and whether companies resume planned investment. A broad rating trend can provide context, but it does not replace analysis of individual companies.
Krishnan’s assessment suggests India Inc begins this period from a relatively stable credit position. How long that stability holds will depend on economic conditions and the pressures companies face in their own markets.