India Inc. is projected to post a steady year-on-year (YoY) revenue growth of 5-6 per cent in the second quarter of FY2026, slightly up from the 5.5 per cent growth seen
in Q1 FY2026, according to a report by credit rating agency ICRA. The growth momentum is largely supported by increased rural demand alongside structural factors such as premiumisation and the expanding reach of organised players across sectors. The report noted, "India Inc. to report modest YoY revenue growth of 5-6 per cent in Q2 FY2026 (5.5 per cent in Q1 FY2026), led by firm rural demand." Uncertainty Around GST Rationalisation ICRA’s analysis also highlights that credit metrics are expected to remain stable, with the interest coverage ratio estimated to be between 4.9 and 5.1 times in Q2 FY2026, consistent with Q1 levels. The report, however, raised caution regarding uncertainties around the proposed GST rationalisation, which may lead to some discretionary spending being postponed to the latter half of the fiscal year, potentially dampening demand temporarily in specific sectors. Data from 585 listed companies (excluding financial entities) showed a 5.5 per cent YoY revenue growth in Q1 FY2026, led by consumption-driven sectors such as consumer durables, retail, hospitality, and gems & jewellery, alongside infrastructure sectors like capital goods and cement, the report added. Sectoral Insights And Future Outlook On a sequential basis, revenues dipped by 4.1 per cent in Q1 FY2026, impacted by softness in real estate, construction, capital goods, hotels, and airlines after a strong Q4 FY2025. Urban demand has remained subdued over the past 18 months, yet premiumisation trends persist in automobiles, FMCG, and watches, helping maintain revenue growth despite softer volume increases. Operating profit margins (OPM) stood at 18.1 per cent in Q1 FY2026, with telecom, cement, and real estate benefiting from better demand and operating leverage. However, margins contracted in autos, consumer durables, and metals & mining due to higher input costs and lower realisations. The report also flagged that global uncertainties may delay private capital expenditure cycles, but investments in electronics, semiconductors, and electric vehicles are expected to accelerate. Government capital expenditure will continue to underpin investment activity, although growth may slow in the later part of FY2026 following a front-loaded Q1.
