New Delhi, Feb 26 India Inc. is expected to sustain year‑on‑year revenue growth of 8–10 per cent in Q4 FY26 and expand operating profit margins by 50–75 basis points, supported by firm rural demand and a gradual urban consumption recovery, a report said on Thursday.
The report from ratings agency ICRA said the credit metrics are expected to remain healthy, with interest coverage ratio likely at about 5.3–5.5 times, broadly stable compared to 5.3 times in Q3FY26.
"Domestic rural demand remains resilient, while policy tailwinds such as GST rate rationalisation, income tax relief announced in the Union Budget 2025, cumulative reduction of 125 bps in policy rates by the Reserve Bank of India between February and December 2025, and easing food inflation are expected to support a gradual revival in urban consumption," said Kinjal Shah, Senior Vice President & Co-Group Head - Corporate Ratings, ICRA Limited.
On the external front, the recent cut in US tariff and various free trade agreements have improved the medium-term growth prospects for export-oriented sectors such as textiles, diamonds, leather, and auto components, the ratings said.
However, the report maintained that near term uncertainty in the trade environment is far from over, given the tariff vacillations, ongoing geopolitical tensions, and the evolving supply-chain realignments.
Consumption oriented sectors such as automobiles emerged as key beneficiaries of GST 2.0 reforms, reflected in around 20 per cent YoY growth in sales volumes across several segments in Q3 FY26.
In the hospitality sector, while the overall demand trend remained healthy, mid-scale hotel operators recorded a modest margin dip in Q3 FY26 due to withdrawal of certain input tax credit benefits, which limited the ability to offset tax incidence on operating costs, the report noted.
Early signs of private capex revival are visible in policy-backed segments like defence, electronics manufacturing, other PLI-supported sectors, renewables, and data centres, the ratings agency said.
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