The credit quality of India Inc is still uncertain as the ratings of 314 companies were downgraded and only 287 were upgraded of the 7,000 entities whose ratings were outstanding at the beginning of the fiscal year. According to Icra, it suggests that meaningful improvement in the credit quality of Indian entities is not apparent.

Among the downgrades were sectors like metals, engineering, gems & jewellery and textiles which have experienced stress in the last few quarters. However, the ratings agency observed that the volume of rating upgrades has been declining.

Icra’s CRO, Mr Anjan Ghosh said “Further downside risks to the overall credit quality of corporate and financial sector entities appear limited as of now, given the various policy actions taken by the government in various sectors including power, roads and metals — sectors that account for the highest proportion of the banking sector’s credit exposure.”

Comsumption-oriented sectors like automobiles, consumer durables, FMCG and retail may gather steam in the near term as the payouts from the 7th Pay Commission and the One Rank One Pension is implemented.

From the credit perspective, high levels of debt of large corporate groups and reduced yet continuing stress in some highly capital intensive sectors like power and steel remain the key areas of concern. On balance, the credit quality of India’s corporate sector entities is unlikely to worsen further.

Commenting on the trend in rating upgrades, Mr. Jitin Makkar, head,credit policy, Icra, said, “The reduction in instances of upgrades, a trend that had started in the second half of 2015, continued in first half of 2017 because sectors like power, real estate & construction, metals and engineering continue to be stressed, and limited the possibility of rating upgrades in these sectors.”