Source: Mint
Indian firms are under pressure while analysts decrease earnings estimates at the most dramatic levels in Asia’s biggest downgrade. Pressure from rising U.S. tariffs and relaxed corporate performance is introducing new challenges into the economy, even as the government continues to advocate for new tax reform to bolster growth.
Big Drop in Earnings Forecasts
Based on LSEG IBES data, forward 12-month earnings estimates for large and mid-sized Indian companies have declined by 1.2% in only two weeks. The sharpest earnings downgrade across Asia. The downgrades come after a very poor quarterly results season that has already damaged benchmark stock indexes.
Indian companies have experienced single-digit earnings growth in five consecutive quarters, in sharp contrast to solid 15–25% growth from 2020 to 2024.
The U.S. imposes tariff risks.
The economy in India is primarily domestic, and companies in the Nifty 50 index produce only 9% of their revenues from the U.S. Still, the potential for tariffs of 50% on exports to the U.S. could still threaten growth.
According to a study by MUFG, if tariffs persist at this level, this could see GDP growth drop by approximately 1 percentage point in India, while sectors with large-scale employment like textiles are expected to be worst impacted.
“It’s a little bit of an interesting time given what’s happened with the tariffs that have been imposed on India,” said Raisah Rasid, global market strategist at J.P. Morgan Asset Management.
Government Reaction: Tax Reforms
To cushion the fallout from trade challenges, Prime Minister Narendra Modi announced substantial tax reforms to increase household consumption and support domestic demand.
Economists at Standard Chartered suggest that these reforms could contribute 0.35–0.45 percentage points to India’s GDP growth by FY2027.
Between FY22 and FY24, India’s real GDP growth averaged 8.8%, the highest in Asia-Pacific. Growth is now expected to moderate to approximately 6.8% for the next three years.
Strain on Sectors
The earnings downgrades are widespread across all industries. Autos and components, capital goods, food and beverages, and consumer durables have all seen forward earnings cut by about 1% or greater in the wake of April–June results. This broad weakness indicates challenges for both export-oriented and domestic industries.
Sectors Experiencing Difficulties
Earnings downgrades are occurring across many sectors. Automobiles and components, capital goods, food and beverages, and consumer durables have seen forward earnings cut by about 1% or higher due to April–June results.
This broad weakness demonstrates difficulties across both export-oriented and domestic sectors.
“After disappointing earnings growth of only 6% in 2024, the pace of recovery remains sluggish in 2025, as indicated by both the economic growth parameters and corporate earnings,” said Rajat Agarwal, Asia equity strategist at Societe Generale.
Outlook: India faces a difficult juggling act. While tax reforms could support domestic consumption, weak earnings, declining investor interest and high U.S. tariff risk diminished the outlook even further. Policymakers will have to protect critical industries and convince investors they can deliver credible growth.
