El Nino unlikely to dent rural demand: Crisil
India Inc will not be impacted even if the Reserve Bank delivers the widely expected 0.50 percentage point rate hike in the remainder of the calendar year, a domestic credit rating agency said on Wednesday.
The El Niño-led rainfall shortfall is also unlikely to dent rural demand, Crisil Ratings said, pointing out that non-crop incomes account for over 40 per cent of agricultural output and the policy measures will also be of help.
The geopolitical upheaval caused by the US-Israel aggression in the Middle East is also unlikely to hurt corporate India, the agency said, giving a stable outlook to credit performance in the future. Even as the war continued, the agency said that the 'credit ratio', which is the number of upgrades to downgrades in its portfolio of 7,200 companies, 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 said.
Subodh Rai, the managing director of the agency, said 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 said diamond polishers, specialty chemicals and polyester textiles continue to be at risk because of the war, while others, including airlines, ceramics and flexible packaging, have seen an upgrade to 'stable' in their respective credit quality outlook. The gross non-performing assets ratio for banks can increase marginally to between 1.9-2 per cent by the end of the fiscal year from 1.8 per cent in the year-ago period, it said.
“A rate hike 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 de-leveraged balance sheets.
The weak monsoon is a key monitorable going forward, the agency said, adding that it may impact tractor manufacturers and microlenders. However, Rai said that it is unlikely to impact rural demand in the economy.
