New Delhi: Fitch Ratings predicted a significant uptick in the profitability of Indian corporates, propelled by the country's robust economic growth. "Despite challenges stemming from sluggish overseas markets, India's resilient GDP growth, projected at 6.5 per cent in the financial year ending March 2025 (FY25), positions the nation among the world's fastest-growing sovereigns.
The anticipated economic expansion is expected to fuel demand across various sectors, contributing to a substantial increase in profits. Fitch Ratings predicts a profitability surge in FY25, projecting a 290 basis points improvement compared to FY23 levels. This surge, coupled with easing input cost pressures, is poised to provide Indian corporates with ample rating headroom, mitigating concerns related to higher capital expenditures. Key sectors poised to benefit from India's economic momentum include cement, electricity, petroleum products, and steel. High-frequency data for 2023 indicates sustained demand well above pre-COVID-19 pandemic levels.
The country's intensified infrastructure spending is set to drive steel demand, while a buoyant automotive sector is expected to maintain growth despite a projected moderation after robust expansion in 2023. In the realm of information technology (IT) services, while the slowdown in demand from the US and eurozone may temper sales growth, Fitch Ratings anticipates an offsetting effect. Easing employee attrition and wage pressure within the IT services industry should bolster profitability, ensuring a solid rating headroom for rated companies.