India’s Economic Challenges Ahead

According to a recent report by Jefferies, India’s corporate revenue and earnings momentum may face significant headwinds in the upcoming financial year. This is due to an expected moderation in nominal GDP growth, projected to slow to 9 per cent in FY26.

Historical Context and Future Projections

The brokerage highlights that this would mark the second-lowest growth rate since FY2004, excluding the pandemic-hit FY21. Despite real GDP growth holding steady at around 6.5 per cent, the fall in nominal GDP is attributed to easing inflation, which is weighing on the overall nominal growth figures.

Impact on Corporate Sector and Credit Growth

Jefferies warns that softer nominal variables may pull down earnings momentum across sectors. The slowdown in nominal growth is also likely to impact credit expansion, with credit growth unlikely to exceed 11–12 per cent by March 2026.

A Look Back and What It Means for the Future

The report notes that the projected 9 per cent nominal GDP growth in FY26 would be the lowest since FY20. On average, nominal GDP growth between FY04 and FY25 has been about 12.6 per cent. A drop from this historical norm could signal a phase of relatively weaker business growth and lower corporate earnings.