By Samannay Biswas
India鈥檚 corporate sector may face a tougher fiscal year ahead, with global brokerage firm Jefferies projecting that nominal GDP growth could slip to 9 per cent in FY26, marking its lowest rate since FY20, and the second-lowest since FY2004, excluding the Covid-hit FY21. The slowdown, according to the report, is primarily due to easing inflation, which is expected to weigh heavily on headline growth figures, corporate revenues, and overall economic momentum. “Don鈥檛 expect corporate revenue growth to bounce materially in FY26,” Jefferies stated in its latest note, citing softer nominal variables as a key concern. Although real GDP is projected to remain steady at around 6.5 per cent, a weak deflator resulting from lower inflation would drag nominal growth, which is the basis for revenue and earnings projections across sectors. Revenue and Credit Growth Set to Decelerate Nominal GDP is crucial for calculating business turnover, pricing power, and government revenue. The brokerage warned that corporate earnings momentum could weaken in FY26, largely because most firms rely on nominal鈥攏ot real鈥攊ndicators for topline growth. One of the major sectors expected to feel the pinch is financial services, as credit expansion is closely tied to nominal GDP trends. 鈥淐redit growth is unlikely to exceed 11鈥12 per cent by March 2026,鈥 Jefferies said, despite the Reserve Bank of India鈥檚 pro-growth monetary stance. Historically, credit growth in India has moved in lockstep with nominal GDP, especially in years when inflation is a significant contributor. The upcoming year, however, may see a disconnect between stable real output and weaker nominal figures, leading to a flattening of credit demand across industrial and consumer sectors. A Step Down from the Historical Trend Between FY04 and FY25, India鈥檚 nominal GDP has averaged around 12.6 per cent growth annually. The forecasted 9 per cent for FY26 is therefore a sharp deviation from the long-term trend. For context, in FY20, nominal growth had slowed to 6.4 per cent when real GDP rose just 3.9 per cent, and inflation鈥攁s measured by the GDP deflator鈥攚as about 2.5 per cent. This historical comparison, Jefferies argues, reinforces concerns that even a solid real growth base isn鈥檛 enough to sustain corporate profitability, especially when inflation moderates faster than expected. Sectoral Impact and Investment Implications While easing inflation may benefit consumers, it reduces pricing power for companies, especially in cyclical sectors like manufacturing, construction, and energy, which typically benefit from stronger nominal growth. Further, subdued earnings may deter private investment, especially if credit remains sluggish and operating margins stay compressed. Investors may need to recalibrate earnings expectations, particularly in sectors like banking, telecom, FMCG, and infrastructure, which are closely tied to domestic consumption and credit cycles. At the macro level, a slowdown in nominal growth can also affect fiscal deficit targets, as tax collections鈥攑articularly GST and corporate tax鈥攁re aligned with nominal GDP. This could place additional pressure on public finances in a year when India is also negotiating trade deals and adjusting to external risks like global interest rates and tariff policies.