Companies Economy Live April 2, 2025 0 Comments

Crisil, CareEdge expect strong corporate balance sheets to act as a shield against changes in US trade policy

Credit rating agencies Crisil Ratings and CareEdge Ratings expect strong corporate balance sheets to act as a shield against changes in the US trade policy and imposition of reciprocal tariffs without affecting their credit quality materially.

Crisil Ratings noted that the US has announced a raft of tariff moves over the past several months. With back-and-forth on these announcements ongoing, the situation continues to evolve.

Crisil Ratings’ credit ratio for India Inc declined a tad in H2 FY25

On the changes in the US trade policy and imposition of reciprocal tariffs, the rating agency noted that except for smartphones, other sectors are likely to see low to moderate impact on their business risk profiles.

The rating agency observed that in fiscal 2024, India’s merchandise exports were low and constituted 12 per cent of its gross domestic product. Of this, only 2 per cent were to the US and the balance 10 per cent to other geographies.

Key sectors

In this backdrop, it carried out a study on the impact of the proposals on 11 key sectors (smartphones, solar modules and shrimps, textiles and chemicals, engineering and capital goods, pharmaceutical formulations and diamond polishers) that export to the US or could be exposed to dumping risk.

India less vulnerable to external financial shocks, says Moody’s

India boasts a low external vulnerability indicator and a manageable external debt-to-GDP ratio, with only 2% of GDP reliant on exports to the US.

The study factors in tariffs implemented so far and the likely imposition of reciprocal tariffs on India.

Tight ropewalk for India as Trump threatens secondary tariffs on Russian crude

Sources said the stand-off between India’s largest seaborne crude oil supplier and one of its largest export markets is a “tricky curveball”

“At a broad level, except for smartphones, other sectors are likely to see low to moderate impact on their business risk profiles. Strong corporate balance sheets will provide adequate room to absorb this impact without affecting credit quality materially,” per Crisil Ratings assessment.

Sachin Gupta, Executive Director and Chief Rating Officer, CareEdge Ratings, observed that the imposition of US tariffs could disrupt momentum for export-driven sectors, particularly those reliant on discretionary spending, while also sparking intense price competition from other affected economies.

“This uncertainty could keep private sector capital expenditure on the sidelines until clearer signals emerge. That said, not all is bleak—trade agreements and rupee depreciation could offer much-needed relief to exporters. At the same time, Corporate India’s strong, deleveraged balance sheets act as a sturdy shield against external volatility,” he said.

CareEdge emphasised that the resilience of Indian corporates is reinforced by strong and deleveraged balance sheets, providing a crucial buffer against external shocks. While the strength of domestic demand will serve as a key anchor, the unfolding global tariff war and geopolitical uncertainties will shape the road ahead.

Reciprocal tariffs

ICRA observed that India not among the large trade partners of the US. It assessed that high tariff differentials with India means US may respond with high reciprocal tariffs.

The agency noted that given the possibility of reciprocal tariffs being levied by the US on India (as has been done on other countries), Indian exporters will need to navigate trade flow adjustments.

Additionally, US tariff actions are likely to exert downward pressure on the rupee against the dollar, which could partially offset the impact on export revenues in rupee terms. ICRA said India Inc.’s strong balance sheets positioned to navigate global uncertainties.