Credit rating agency, S&P Global Ratings in its latest report has predicted that companies and banks in India are likely to feel the bite of rising rates and inflation, but rated firms are better cushioned to withstand the pressure.
According to the report, further hike in interest rates is on the cards as the inflation remains above the RBI's upper tolerance limit of 6 percent despite a 140 basis points increase in the policy rate in the current fiscal year. The rating agency also expects India's continued strong economic growth to positively affect companies' revenues.
S&P Global Ratings further underlined impacts of inflation, noting that inflation is eroding the purchasing power of the poor because energy and food account for a chunk of their consumption basket. Despite this, there are factors supporting growth.
As per the agency, a normal monsoon will prop up agriculture production and help control food inflation. The rebound in contact-based services will also boost growth, especially as COVID-19 vaccination penetration improves and people learn to live with the virus.
