India's Economic Outlook for FY26

Fitch Ratings has highlighted India's promising economic trajectory, with a steady GDP growth outlook and improved financial health of the banking sector. These factors, coupled with expected interest-rate cuts in 2025, are poised to enhance credit access for corporates in FY26.

Driving Forces Behind the Optimism

The anticipation of wider EBITDA margins, despite high capex intensity, is expected to improve the credit metrics of rated Indian corporates in the next financial year. However, potential downside risks include significant rises in energy prices, sustained downward pressure on the Indian rupee, or adverse trade protectionist measures that could dampen exports.

Sector-Specific Growth Projections

Fitch forecasts a varied growth across sectors, with aggregate sales growth for Fitch-rated corporates likely to remain limited to 1-2% in FY26. The report underscores the impact of lower prices on oil and gas upstream, and refining and marketing companies, while other sectors are expected to see different growth rates.

With India's GDP growth projected at 6.5% and robust infrastructure spending, sectors such as cement, electricity, petroleum products, steel, and engineering and construction (E&C) are anticipated to experience healthy demand. Meanwhile, the IT services sector may see only mid-single-digit sales growth due to cautious spending in key overseas markets.