India's rising vaccination rate, stabilising consumer confidence, low interest rates and higher public spending underpin positive credit fundamentals for nonfinancial companies, Moody's Investors Service said in the report.

"India's steady progress on inoculation against the coronavirus will support a sustained recovery in economic activity. Consumer demand, spending and manufacturing activity are recovering following the easing of pandemic restrictions. These trends, including high commodity prices, will propel significant growth in rated companies' EBITDA over the next 12-18 months," said Sweta Patodia, a Moody's Analyst.

However, if new waves of infections were to occur, it could trigger fresh lockdowns and erode consumer sentiment. Such a scenario would dampen economic activity and consumer demand, potentially leading to subdued EBITDA growth of less than 15-20 per cent for Indian companies over the next 12-18 months. In addition, delays in government spending, energy shortages that lower industrial production or softening commodity prices could curtail companies' earnings, the report added.

India's currently low interest rates will reduce funding costs and support new capital investment as demand grows. However, rising inflation may result in a faster-than-expected increase in interest rates, which would weigh on business investment, Moody’s said.

Fibre2Fashion News Desk (KD)