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Crisil Ratings announced on Monday that the credit quality outlook for Indian corporates remains positive for the April-September period of the 2024-25 fiscal year, with upgrades surpassing downgrades.

During the last fiscal year, Crisil recorded 409 rating upgrades and 228 downgrades. Sectors reliant on exports, such as textiles and seafood, experienced a higher downgrade rate due to subdued global demand and inventory costs impacting profitability.

"India Inc's credit quality outlook is optimistic for the first half of fiscal 2025, with upgrades expected to exceed downgrades. The multiplier effect of government capital expenditure will continue to drive growth in infrastructure and related sectors. Strong balance sheets will bolster the credit quality outlook, with prudent capital expenditure funding anticipated," stated Crisil Ratings.

It forecasted that outstanding bank credit would surpass Rs 200 lakh crore by March 2025, up from Rs 172 lakh crore a year earlier, despite a moderation in credit growth rates.

Despite an anticipated GDP growth of 6.8%, the Indian economy is poised to remain the fastest-growing large economy in the current fiscal year. However, growth is expected to moderate from the 7.6% forecast for 2023-24, due to high interest rates and reduced fiscal stimulus affecting demand, according to Crisil.

Gurpreet Chhatwal, Managing Director of Crisil Ratings, highlighted the three key pillars supporting India Inc's credit quality: deleveraged balance sheets, sustained domestic demand, and government-led capital expenditure, which contributed to elevated upgrade rates in the second half of FY24. Chhatwal expressed optimism about the potential for a broad-based increase in private capital expenditure, although sectors linked to exports may face uncertainties.

Credit growth is anticipated to remain healthy, albeit slightly lower at 14% in the current fiscal year compared to 16% in the previous fiscal year, with overall gross non-performing assets (NPAs) expected to continue declining to new decade lows.