NEW DELHI — Corporate India is expected to sustain year-over-year revenue growth of 8–10 percent in the fourth quarter of FY26, with operating profit margins likely to expand by 50–75 basis points, supported by strong rural demand and a gradual recovery in urban consumption, according to a report released Thursday by ratings agency ICRA.
The report said credit metrics are projected to remain healthy, with the interest coverage ratio estimated at 5.3–5.5 times, broadly stable compared with 5.3 times in the third quarter of FY26.
“Domestic rural demand remains resilient, while policy tailwinds such as GST rate rationalisation, income tax relief announced in the Union Budget 2025, cumulative reduction of 125 bps in policy rates by the Reserve Bank of India between February and December 2025, and easing food inflation are expected to support a gradual revival in urban consumption,” said Kinjal Shah, Senior Vice President and Co-Group Head – Corporate Ratings at ICRA Limited.
On the external front, ICRA noted that a recent cut in U.S. tariffs and multiple free trade agreements have improved medium-term growth prospects for export-oriented sectors including textiles, diamonds, leather and auto components.
However, the agency cautioned that near-term uncertainty in the global trade environment persists due to fluctuating tariff policies, ongoing geopolitical tensions and shifting supply chains.
Consumption-driven sectors such as automobiles have emerged as key beneficiaries of GST 2.0 reforms, with sales volumes across several segments rising about 20 percent year-over-year in the third quarter of FY26.
In the hospitality sector, overall demand remained healthy, though mid-scale hotel operators experienced a modest margin decline in Q3 FY26 following the withdrawal of certain input tax credit benefits, limiting their ability to offset higher operating costs.
ICRA also pointed to early signs of a revival in private capital expenditure, particularly in policy-supported segments such as defense, electronics manufacturing, production-linked incentive-backed sectors, renewable energy and data centers. (Source: IANS)
