An S&P Global Ratings report published on Thursday estimates that India's GDP will expand by 6.7 percent in fiscal 2025 (through March), making it the Asia-Pacific region's fastest-growing economy.
The report identifies that India's limited exposure to the US protects it from risks of trade tariffs, and its strong domestic orientation and good economic fundamentals enable to strengthen Indian firms against outside pressure.
The report states that the majority of Indian companies graded by S&P Global are in a good position to absorb short-term earnings setbacks. The companies have strengthened their operating and financial stability over recent years, giving them a cushion to absorb such difficulties. The companies are also aided by India's strong economy, underpinned by large-scale infrastructure spending and growing consumer expenditures.
Indian firms are also safeguarded by their solid credit worthiness and ongoing domestic market expansion. The report cited that the majority of these firms will probably source funding locally, as liquidity becomes more available in the local market.
The industries most exposed to the US market are IT services, chemicals, and automobiles. Although services are not exposed to tariffs, some automobile firms, like Tata Motors through its subsidiary Jaguar Land Rover, have high exposure to the US market.
India is also reported to have ambitious expansion plans for renewable energy capacity to 500 gigawatts (GW) by 2032, from its current 200GW. Substantial investment in the transmission side is also present, with Power Grid Corporation of India set to double its capital spending to over INR 300 billion every year in the next few years.
S&P Global anticipates that the median revenue and EBITDA growth of its rated companies to be almost 8 percent in fiscal 2025, the fifth year running of such growth, as per the report. The steel, chemicals, and airport industries are forecast to record more-than-average EBITDA growth.
In the steel industry, producers are likely to gain from a marginal reduction in input costs and a major jump in volumes owing to recent capacity additions. But product prices are likely to hold steady. The chemicals industry, following a downturn in 2024, is also likely to bounce back.
The report also estimates that Indian companies will raise funds largely from the domestic markets this year, considering the cost of financing is lower in the local market. Though dollar bonds, as a source of offshore financing, are still available, the companies are likely to use them judiciously.
The overall credit strengthening and robust economic growth in India also add to the strength of these companies.
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