Indian chemical companies are debt-free enough to survive trade wars

Mumbai: A report on India's chemical manufacturing industry, released by India Ratings and Research (Ind-Ra), reveals a surprisingly solid financial foundation. Despite facing global challenges like too much supply worldwide and the recent increase in US trade tariffs, the companies’ bank accounts are strong enough to protect them from sudden economic troubles. Think of it this way: the industry has built a thick financial safety cushion.

Their financial health is clearly getting better. A key measure of debt – how much money a company owes compared to its annual operating income – has fallen significantly. It dropped to 0.9x in the last financial year (FY25) from 1.4x the year before. In simple terms, the industry's total debt is now less than what it earns in a single year, showing a low-risk position.

Another important indicator is their ability to pay interest on loans. For every rupee (₹) of interest they had to pay in the first quarter of the current year (Q1FY26), they earned ₹5.4. This high figure proves they can easily handle their loan payments, giving them a large amount of financial ‘headroom’ or breathing space to absorb unexpected costs or drops in sales.

This strong position is not accidental; it's the result of smart, cautious management. The industry has been careful about spending money. Companies have been paying down their debts by gradually reducing the amount of stock they hold and by limiting major construction projects. Overall spending on new factories and expansions (called capital expenditure, or capex) dropped by 4 per cent last year, with factory building efforts slowing down to 7.1 per cent of revenue. This suggests companies are choosing prudence over aggressive expansion.

The timing of this financial strength is crucial because of new external pressures. Siddharth Rego, an Associate Director at Ind-Ra, explained the situation with the new trade rules. “Chemical companies likely witnessed the impact of increased US tariffs in Q2FY26, although the full impact will be visible only in Q3FY26. This is because the tariffs were increased towards the end of August and there was frontloading of orders and deliveries in the previous weeks,” said Rego. This looming tariff threat to export earnings highlights why a secure balance sheet is vital.

Looking ahead, the manufacturers are also being smart about their long-term investments. Instead of starting large, risky new projects, they are concentrating only on essential maintenance and finishing projects they've already started. Even more telling is their focus on building multi-purpose facilities. This means they are creating flexible factories that can easily switch production if the market for one product collapses, effectively diversifying their risk and offering more operational agility when prices change rapidly.

As a result of this careful approach, most of the industry is financially secure. About 84 per cent of chemical companies are considered to have a moderate credit profile, meaning they can pay their loan interest more than three times over. This suggests widespread stability. However, the report cautions that not every company is safe as about 8 per cent are still struggling financially, and those currently building large new plants might feel a temporary squeeze if market conditions worsen.

While the industry faces tough headwinds from global competition and new US tariffs, the Indian chemical sector's low debt levels and strong cash flow provide a powerful foundation. This financial cushion allows them to manage risks and remain stable throughout the current challenging economic cycle.

Manufacturers signal intent to expand despite persistent constraints

Mumbai: India’s manufacturing sector is showing signs of sustained momentum, with average capacity utilisation holding steady at 75 per cent and more than half of surveyed firms planning to invest or expand operations over the next six months. These findings, drawn from the Federation of Indian Chambers of Commerce and Industry’s (FICCI) latest quarterly survey on manufacturing, reflect cautious optimism across industries despite enduring challenges.

The survey, which covered eight major manufacturing sectors and included responses from both large enterprises and small and medium enterprises (SMEs) with a combined annual turnover exceeding ₹3 lakh crore, found that capacity utilisation levels have remained broadly consistent with previous quarters. Sub-sector data reveals minor variations – machine tools and miscellaneous segments reported higher-than-average utilisation at 77 and 78 per cent respectively, while capital goods and electronics hovered around 70 per cent.

This level of activity, according to FICCI, indicates a stable production environment and a willingness among manufacturers to commit fresh capital. ‘The investment outlook is positive’, the report notes, ‘with over 50 per cent of respondents indicating plans for investments and expansions in the next six months’. This sentiment is echoed across sectors such as automotive, metal products, and textiles, where firms are preparing to scale up capacity in anticipation of stronger domestic demand.

However, the path to expansion is not without friction. Respondents cited a range of constraints that continue to impede growth. Global trade uncertainties – including tariffs, supply chain disruptions, and geopolitical tensions – remain a concern, particularly for export-oriented units. Operational bottlenecks such as raw material shortages, labour availability, and high input costs have also been flagged as persistent issues.

Regulatory hurdles, especially those affecting compliance and approvals for new projects, were mentioned by several firms as a deterrent to timely execution. In some cases, manufacturers reported delays in securing industrial land and navigating environmental clearances, which have slowed down planned investments. A respondent from the capital goods sector noted that ‘uncertainty in demand and financial constraints make further investments difficult’, underscoring the need for more predictable policy support.

Despite these challenges, the survey suggests that access to finance is not a major barrier for most firms. Over 81 per cent of respondents reported sufficient availability of funds from banks for working capital and long-term capital needs. The average interest rate paid by manufacturers stood at 8.9 per cent, with some sectors such as capital goods reporting slightly lower rates.

The broader investment intent appears to be driven by a combination of stable production levels, anticipated demand recovery, and sector-specific policy measures. Recent goods and services tax (GST) rate cuts, for instance, have boosted sentiment in consumer-facing segments, while infrastructure-linked sectors are banking on continued public spending to sustain order flows.

Still, the uneven pace of recovery across sub-sectors calls for targeted interventions. While machine tools and automotive are poised for moderate to strong growth, chemicals and textiles remain cautious, citing cost pressures and limited export visibility. The survey also highlights the need for improved labour skilling, with around 20 per cent of respondents indicating a shortage of skilled workforce in their respective sectors.

India’s manufacturing sector is preparing to invest and expand, but the momentum is tempered by structural and external constraints. The next six months will be critical in determining whether this intent translates into tangible capacity additions, and whether policy and infrastructure can keep pace with industry’s evolving needs.

Microalgae-powered air purification device tackles indoor CO₂ with scientific precision

Mumbai: In a city where air quality concerns often focus on traffic and industrial emissions, a 17-year-old student from Mumbai has turned attention to a quieter but equally pressing issue – indoor carbon dioxide levels. Hridank Garodia, a Grade 11 student at Dhirubhai Ambani International School, has developed Aerovive, a microalgae-based air purification device that directly addresses elevated carbon dioxide (CO₂) concentrations in enclosed spaces.

Garodia’s interest in the problem began with a simple observation: students struggled to concentrate during exams. His research revealed that CO₂ levels in classrooms frequently exceeded 1200–1500 parts per million (ppm), well above the threshold of around 945 ppm where cognitive performance begins to decline. The issue extended beyond schools to offices, clinics, gyms and homes – environments where people spend the majority of their time.

Aerovive offers a biologically driven solution. The compact unit uses living microalgae to absorb carbon dioxide and release oxygen, effectively replicating the air-cleaning capacity of approximately 40 houseplants. Unlike conventional air purifiers that rely on filters or chemical treatments, Aerovive leverages photosynthetic organisms to perform continuous gas exchange. The device has undergone three rounds of prototyping and field testing, supported by researchers at IIT Bombay, and has demonstrated measurable reductions in indoor CO₂ levels.

Hridank Garodia

“We obsess over outdoor pollution, but spend 90% of our time indoors breathing air that’s often worse. Aerovive is designed to make homes, schools and offices healthier – so we can breathe better, think better and live better,” said Garodia.

The innovation has attracted attention from both scientific and commercial quarters. Aerovive was recognised at the IRIS National Science Fair and presented at the ICSEAT International Conference. It has also secured a ₹10 lakh Letter of Intent (LoI) for deployment in Mumbai’s largest office park, indicating early interest in scaling the technology for corporate environments.

Garodia’s work extends beyond the device itself. Through The Invisible Heroes Lab, he has developed a 15-session educational programme that introduces students to the unseen biological systems – algae, fungi and bacteria – that underpin environmental health. The initiative has reached over 1,000 students through workshops across Mumbai, with plans to engage hundreds more in the coming year.

The broader ambition is to integrate Aerovive into clinics, schools and corporate campuses, while expanding the educational outreach nationwide. Garodia’s approach combines scientific rigour with a focus on human wellness, positioning clean indoor air not just as a technical challenge but as a public health priority.

His efforts have earned recognition from institutions including National Geographic, where he received the Cultivating Empathy for Earth Award, and the World Science Scholars programme under physicist Brian Greene. Mentorship from experts at IIT Bombay and Harvard has helped refine both the technical and educational dimensions of his work.

Aerovive’s uniqueness lies in its biological foundation. While air purification technologies typically rely on mechanical filtration or ionisation, this device uses a living system to perform gas exchange – a method that is both energy-efficient and scalable. Its design reflects a growing interest in biomimicry and nature-based solutions to environmental challenges, particularly in urban settings where space and energy constraints limit traditional approaches.

Garodia’s innovation arrives at a time when indoor air quality is gaining renewed attention, especially in the context of post-pandemic health and workplace design. By focusing on CO₂, a gas often overlooked in indoor pollution discussions, Aerovive addresses a subtle but significant factor affecting cognitive function and overall wellbeing.

As the device moves toward broader deployment, its success will depend on sustained performance, ease of maintenance and cost-effectiveness. But its early reception suggests that biologically inspired solutions may have a growing role in how cities manage air quality – not just outdoors, but in the spaces where people live, learn and work.

NBFCs expand gold loan portfolios despite losing market share

Mumbai: Non-Banking Financial Companies (NBFCs) are poised to record robust growth in their gold loan portfolios in the current financial year, even as their share of the organised market continues to shrink. According to a recent report by ICRA, NBFCs’ assets under management (AUM) in the gold loan segment are expected to grow by 30–35 per cent in FY2026, driven largely by elevated gold prices and a slowdown in unsecured lending.

The organised gold loan market is projected to reach ₹15 trillion by March 2026, a year ahead of previous estimates. This acceleration is attributed to the sustained rise in gold prices, which has boosted the value of collateral and increased demand for loans secured by gold jewellery. Despite this expansion, NBFCs’ share of the market has declined steadily, falling to 18 per cent as of March 2025 from 22 per cent in March 2021. Banks now dominate the segment, accounting for 82 per cent of total organised gold loan AUM.

ICRA notes that NBFCs have maintained strong growth momentum, with their gold loan AUM reaching approximately ₹2.4 trillion by June 2025, a year-on-year increase of around 41%. However, this growth has not translated into a larger market share, as banks have expanded more aggressively. Over the six-year period from FY2020 to FY2025, bank gold loan AUM grew at a compound annual rate of 26 per cent, compared to 20 per cent for NBFCs.

The concentration of gold loan assets among NBFCs remains high, though it is gradually dispersing. The top four NBFCs accounted for 81 per cent of the segment’s AUM in March 2025, down from 90 per cent in March 2022. This suggests that smaller players are beginning to gain ground, albeit slowly.

One notable trend is the divergence between the growth in AUM and the actual quantity of gold held as collateral. Between FY2020 and FY2025, the tonnage of gold held by NBFCs grew at a modest 1.7 per cent compound annual rate, while AUM rose by 20 per cent. In some cases, NBFCs reported a decline in gold holdings even as their loan books expanded. This discrepancy is partly explained by the increase in average loan ticket sizes, which more than doubled during the same period.

Branch expansion has also been subdued, with the number of NBFC branches growing at a compound annual rate of just 3.3 per cent from FY2020 to FY2025. Despite this, NBFCs have managed to sustain healthy lending spreads, supported by operational efficiencies and moderate credit losses. These factors have helped preserve net earnings, even as competition intensifies.

The competitive landscape is shifting, with banks reclassifying gold-backed loans from agricultural to retail categories. This reclassification has led to a rise in retail gold loans, which accounted for 18 per cent of total gold loans in March 2025, up from 11 per cent a year earlier. At the same time, the share of agricultural and other gold-backed loans declined to 63 per cent

ICRA cautions that NBFCs face increasing pressure on yields due to the entry of new players and the continued expansion of banks in the gold loan segment. To remain competitive, NBFCs will need to further improve operational efficiency and build buffers against margin compression.

While NBFCs are unlikely to regain their former dominance in the gold loan market, their projected growth in FY2026 underscores their resilience and adaptability. The segment remains a key area of focus for these institutions, particularly as they seek alternatives to unsecured lending in a high-risk environment.

Startup accelerator platform WaveX expands national footprint with seven new incubators

Mumbai: WaveX, the startup accelerator platform under India’s Ministry of Information & Broadcasting, has announced the launch of seven new incubation centres aimed at supporting early-stage ventures in the media, entertainment and AVGC-XR sectors. The move marks a significant expansion of the government’s WAVES initiative, which seeks to foster innovation in animation, visual effects, gaming, comics and extended reality technologies.

The new centres will be located at five campuses of the Indian Institute of Mass Communication (IIMC) — Delhi, Jammu, Dhenkanal, Kottayam and Amravati — as well as at the Film and Television Institute of India (FTII) in Pune and the Satyajit Ray Film and Television Institute (SRFTI) in Kolkata. These facilities join the existing flagship incubator at the Indian Institute of Creative Technologies (IICT) in Mumbai, creating a nationwide network of support for creative technology startups.

Each centre will offer access to advanced infrastructure for film production, game development, editing and testing. Startups will be able to use high-end equipment such as 8K cameras, Dolby Atmos preview theatres, virtual production stages, photogrammetry systems and VR testing kits. The IICT Mumbai facility, which serves as the model for the new centres, also includes professional sound and colour-mix theatres, 4K HDR edit suites and the latest gaming consoles. These resources are designed to help startups develop and validate content to global standards.

In addition to physical infrastructure, WaveX will provide structured mentorship, industry and government connections, and opportunities for international exposure. Startups will be eligible to participate in events such as VivaTech in Paris and the Game Developers Conference in the United States. The programme also includes access to cloud services, AI compute resources, and sandbox testing environments across various media formats including OTT, VFX, VR and publishing.

The incubation model operates in two phases. The active phase focuses on business modelling, product development, branding and fundraising, while the passive phase offers lighter mentorship and global showcasing opportunities. Selected startups may also be prioritised for projects outsourced by media units under the Ministry, including Doordarshan, All India Radio and the Press Information Bureau.

Applications for the first cohort are now open, with 15 startups to be selected at each location. A monthly fee of ₹8,500 plus GST will apply. Preference will be given to ventures in the Media-Entertainment and AVGC-XR sectors. Startups can apply via the WaveX portal by selecting their preferred incubation centre.

WaveX’s expansion reflects a broader effort to build a robust ecosystem for creative technologies in India. By partnering with institutions such as IITs and T-Hub, the initiative aims to provide startups with access to wider innovation networks and learning opportunities. The programme’s emphasis on early-stage support, including ventures that are still in conceptual or 'unreal' stages, sets it apart from traditional incubators that typically require market-ready products.

The announcement comes at a time when India’s AVGC-XR sector is gaining momentum, driven by rising demand for immersive content and digital entertainment. With the launch of these new centres, WaveX is positioning itself as a key enabler of growth in this space, offering startups the tools and guidance needed to compete on a global stage.

GST cut on room air-conditioners will ease prices but new star label implementation adds cost

Mumbai: While the recent reduction in goods and services tax (GST) on room air-conditioners (RACs) under two tonnes is expected to lower retail prices, the upcoming implementation of the new Star Label from January 2026 will likely push them back up. According to ICRA, the GST rate cut from 28% to 18%, effective 22 September 2025, could reduce prices by ₹2,000–₹3,000 per unit. However, the new energy efficiency standards under the revised Star Label are projected to increase prices by ₹500–₹2,500 per unit, depending on the model.

The timing of these regulatory changes is expected to influence consumer behaviour in the coming months. ICRA anticipates a wave of pre-buying in the third quarter of FY2026, as consumers seek to take advantage of lower prices before the new label takes effect. This may offer some relief to manufacturers, who are currently grappling with a sharp drop in demand and a significant build-up in inventory.

Sales volumes in the RAC industry are forecast to decline by 10–15% year-on-year in FY2026, falling to 11.0–11.5 million units from a record 12.5–13.0 million units in FY2025. The downturn has been attributed to unseasonal and above-average rainfall during the peak summer months of April to July 2025, particularly in North and Central India. The extended wet spell reduced the number of heatwave days, leading to a 15–20% drop in sales during that period.

As a result, channel inventory has doubled to around 2.5 million units as of July 2025, placing pressure on original equipment manufacturers (OEMs) to clear stock. A partial recovery is expected in the second half of FY2026, especially in Southern and Western regions, where forecasts point to a warmer summer in 2026.

The RAC industry is also preparing for broader regulatory changes beyond the Star Label. The phased implementation of the Quality Control Order (QCO) over the next 12 months will require compliance with Indian Standards and mandate the Bureau of Indian Standards (BIS) quality mark on products. This move is expected to increase indigenisation and reshape manufacturing strategies.

Currently, 65–70% of India’s RAC manufacturing capacity is held by OEMs, with the remaining 30–35% concentrated among contract manufacturers. Nearly 80% of total capacity is controlled by the top seven OEMs, while contract manufacturing is limited to three or four major players. To meet growing domestic demand and adapt to regulatory shifts, manufacturers have announced capital expenditure plans of ₹4,500–₹5,000 crore over the next two to three years. This investment is expected to increase total capacity by 40–50% from the current 24–26 million units.

The Government of India’s production-linked incentive (PLI) scheme for components manufacturing in the consumer durables sector is also playing a role in boosting localisation. ICRA estimates that indigenisation in the RAC industry will rise to 70–75% by FY2028, up from the current 50–60%, as companies pursue backward integration and respond to policy incentives.

Despite the short-term challenges posed by weather variability and regulatory transitions, the long-term outlook for the RAC industry remains positive. Rising temperatures, low household penetration, urbanisation and growing replacement demand for energy-efficient models continue to support structural growth.

India–UK IP pact backs startups, MSMEs and grassroots innovation

Mumbai: The Intellectual Property Rights (IPR) chapter of the India–UK Comprehensive Economic and Trade Agreement (CETA) is being positioned as a pragmatic framework that supports innovation while safeguarding public interest. At a seminar hosted by the Department for Promotion of Industry and Internal Trade (DPIIT) and the Department of Commerce in New Delhi, experts and industry representatives discussed the chapter’s implications for startups, micro, small and medium enterprises (MSMEs), and traditional producers.

According to officials, the IPR provisions in the agreement aim to modernise India’s IP regime without compromising its regulatory autonomy. The framework retains key flexibilities enshrined in the Doha Declaration, including those related to compulsory licensing and public health. Voluntary licensing remains the preferred industry practice, and concerns about harmonisation of patent processes were addressed as procedural rather than substantive changes.

One of the most tangible outcomes of the agreement is the enhanced protection for Indian Geographical Indications (GIs) in the UK market. This is expected to benefit producers of region-specific goods by boosting exports and strengthening India’s cultural branding abroad. Industry voices at the seminar noted that such recognition could be transformative for grassroots producers and small enterprises, many of whom rely on GI-linked products for their livelihoods.

The seminar, organised in collaboration with the Centre for Trade and Investment Law (CTIL), also served to clarify misconceptions surrounding the agreement. Speakers emphasised that the IPR chapter does not curtail India’s policy space but rather reinforces its ability to legislate in line with domestic priorities. The provisions reflect India’s existing legal framework and send a signal to global partners about its commitment to a balanced and forward-looking IP regime.

While the broader contours of the India–UK CETA are still under negotiation, the IPR chapter is being seen as a potential model for future trade agreements. It attempts to strike a balance between encouraging innovation and ensuring access, a dual objective that resonates with India’s developmental goals.

The discussions concluded with a consensus that the chapter offers regulatory rigour without rigidity, and flexibility without dilution. For India’s startup ecosystem, MSMEs and traditional producers, this could mean greater opportunities to scale and compete globally, backed by a legal framework that recognises their unique contributions.

Air India Group plans 20 daily flights from Navi Mumbai International Airport in the initial phase

Mumbai: The Air India Group has announced its intention to begin commercial flight operations from the new Navi Mumbai International Airport (NMIA) from the outset of its first phase. The group’s value carrier, Air India Express, will be a key partner in the airport’s initial operations, with plans to significantly expand its services in the coming years.

In the first phase of the airport’s launch, Air India Express is scheduled to operate 20 daily departures, equating to 40 Air Traffic Movements (ATMs), connecting 15 cities across India. This partnership is part of a broader strategy by the Air India Group to enhance both domestic and international connectivity and support India’s ambition to become the world’s third-largest air passenger market by 2030.

The airline group’s expansion plans extend beyond the initial launch. By mid-2026, it aims to scale up its operations to 55 daily departures – 110 ATMs – which will include up to five daily international flights from NMIA. The group further intends to increase this to 60 daily departures, or 120 ATMs, by Winter 2026, connecting passengers to a growing network of key domestic and global destinations.

Commenting on the development, Campbell Wilson, CEO and Managing Director of Air India said, “We look forward to commencing operations at Navi Mumbai International Airport, as Mumbai joins the league of world cities with more than one airport. We are happy to work with Adani Airports to build NMIA not only as a point that connects to the rest of India, but also as one of the country’s key global transit hubs for both – passengers and cargo – given its strategic geographical location.” 

Arun Bansal, CEO of Adani Airport Holdings, said that Air India Group’s ambitious expansion plans and global vision are perfectly aligned with Adani Airport’s aim of making NMIA a benchmark in global aviation. “The collaboration will redefine Mumbai’s connectivity landscape and strengthen India’s twin-airport strategy,” he said.

Air India Express’s planned presence at NMIA is expected to substantially boost connectivity for the Mumbai Metropolitan Region (MMR) and facilitate seamless international transits through the new airport. 

The Navi Mumbai International Airport is being developed in five phases. The initial launch phase is designed to accommodate 20 million passengers per annum (MPPA) and handle 0.5 million metric tons (MMT) of cargo. Once fully completed, the airport will have the capacity to serve 90 MPPA and handle 3.2 MMT of cargo annually.

Pharmaceutical industry in India shows resilience despite US market slowdown

Mumbai: India’s pharmaceutical industry is expected to post steady revenue growth in the current fiscal year, demonstrating resilience and strategic adaptability amid mounting global challenges. According to ratings agency ICRA, the sector is projected to grow by 7–9 per cent in FY2026, driven by robust performance in domestic and European markets, even as the outlook for the United States, its largest export destination, turns cautious.

The domestic market remains a key pillar of growth, with ICRA forecasting an 8–10% increase in revenues. This is supported by deeper rural penetration, expansion of sales forces, and continued momentum in chronic therapies. Companies have also benefited from new product launches and regular price revisions, which have helped offset subdued volume growth in branded generics. Government measures such as Goods and Services Tax (GST) exemptions and rate reductions on select medicines and medical supplies have further improved affordability and access, aligning with broader healthcare inclusion goals.

In Europe, Indian pharmaceutical firms are expected to record 10–12 per cent revenue growth, following an 18.9 per cent increase in FY2025. This performance is attributed to the launch of nicotine-replacement therapies and other specialty products, including injectables and respiratory drugs. The region continues to offer opportunities for Indian companies to diversify their portfolios and reduce dependence on the US market.

By contrast, growth in the United States is projected to slow to 3–5 per cent in FY2026, down from nearly 10% in the previous year. The decline is largely due to price erosion and falling sales of key drugs such as lenalidomide. Regulatory scrutiny from the US Food and Drug Administration remains a persistent challenge, with warning letters and import alerts delaying product launches and triggering penalties. These issues also increase compliance costs, putting pressure on margins.

Adding to the uncertainty is the recent imposition of 50 per cent tariffs by the US on Indian imports across multiple sectors, effective from August 27, 2025. While pharmaceuticals have not yet been included, the possibility of future inclusion remains a concern for exporters. The proposed ‘most favoured nation’ pricing policy by the US government, aimed at addressing global drug price disparities, could also impact Indian companies operating in that market.

Despite these headwinds, operating profit margins for Indian pharmaceutical firms are expected to remain stable at 24–25 per cent, supported by lower input costs, improved operating leverage, and a growing share of specialty products. Liquidity remains healthy, with companies maintaining sizeable cash reserves and liquid investments.

The sector’s strategic adaptability is evident in its investment plans. ICRA estimates total capital expenditure for its sample set of 25 leading companies, accounting for around 60 per cent of industry revenues, to reach ₹42,000–45,000 crore in FY2026. This includes ₹25,000 crore in acquisitions aimed at expanding geographic and therapeutic footprints. While leverage is expected to rise modestly, with Total Debt/OPBITDA increasing to 1.1–1.2x by March 2026 from 0.8x a year earlier, the overall financial position remains sound.

Research and development spending is projected to stay at 6–7 per cent of revenues, with a growing focus on complex molecules and specialty products. This shift reflects a broader industry trend towards innovation and differentiation, as companies seek to move beyond traditional generics and build more resilient business models.

ICRA’s outlook for the sector remains Stable, underpinned by sustained demand in both domestic and export markets, strong balance sheets, and robust earnings. However, the coming quarters will test the industry’s ability to navigate regulatory risks, tariff uncertainties, and evolving market dynamics.

Aluminium-based battery offers safer alternative to lithium-ion cells

Mumbai: A team of researchers in Bengaluru has developed a new battery technology that could offer a viable alternative to conventional lithium-ion batteries used in consumer electronics and electric vehicles. The innovation, led by scientists from the Centre for Nano and Soft Matter Sciences (CeNS) and the Centre for Nano Science and Engineering (CeNSE) at the Indian Institute of Science (IISc), uses aluminium and a water-based electrolyte to create a flexible, safe and environmentally friendly energy storage solution.

The research was carried out under the Department of Science and Technology (DST), Government of India. The battery is composed of copper hexacyanoferrate (CuHCFe) as the cathode and molybdenum trioxide (MoO₃) as the anode. The cathode is pre-filled with aluminium ions, which enables efficient energy storage and release. The use of aluminium – a widely available and recyclable metal – addresses concerns around the cost, safety and environmental impact of lithium extraction and processing.

Flexible Aqueous Aluminum-Ion Battery Concept: A visual overview of the battery design,
showing what it's made of, how it works, and how it stays reliable even when bent or flexed.
(Picture Courtesy - PIB)

One of the key advantages of the new battery is its mechanical flexibility. In laboratory tests, the device remained operational even when bent or folded, retaining 96.77% of its capacity after 150 charge–discharge cycles. Researchers demonstrated its performance by powering an LCD display while the battery was bent at extreme angles. This feature could be particularly useful in wearable electronics and foldable devices, where traditional rigid batteries limit design possibilities.

The battery’s aqueous electrolyte also contributes to its safety profile. Unlike lithium-ion batteries, which are prone to overheating and can pose fire hazards, the aluminium-based system is stable and non-flammable. This makes it suitable for applications where thermal management and user safety are critical.

The team employed advanced characterisation techniques, including electron microscopy and spectroscopy, to optimise the battery’s internal structure and validate its performance. The materials were engineered at the microscopic level to overcome longstanding challenges in aluminium battery chemistry, such as ion mobility and electrode compatibility.

While the technology is still in the research phase, the results suggest that aluminium-ion batteries could be scaled for broader use in portable electronics, electric mobility and other energy storage applications. The work represents a significant step forward in multivalent ion battery research, which seeks to develop alternatives to lithium-based systems by using ions with higher charge densities.

The development aligns with India’s broader goals of promoting sustainable technologies and reducing dependence on imported raw materials. By leveraging abundant domestic resources and focusing on safety and recyclability, the research contributes to the country’s efforts to build a resilient and environmentally responsible energy infrastructure.

Manufacturing and farming sectors to benefit from lower GST on renewable energy devices

Mumbai: The reduction in Goods and Services Tax (GST) on renewable energy devices from 12% to 5% is expected to deliver substantial benefits to both the manufacturing and farming sectors. The reform, approved by the GST Council and effective from September 22, 2025, is part of a broader effort to lower clean energy costs and accelerate deployment across the country.

For manufacturers of renewable energy equipment, the GST cut will reduce module and component costs by an estimated 3–4%. This cost reduction is likely to enhance the competitiveness of Indian-made products, supporting the government’s Make in India and Aatmanirbhar Bharat initiatives. With India targeting 100 gigawatt (GW) of solar manufacturing capacity by 2030, the reform is expected to encourage new investment in domestic production facilities. Based on current employment multipliers, this expansion could generate between five and seven lakh direct and indirect jobs over the next decade, strengthening the industrial base of India’s clean energy economy.

The manufacturing sector also stands to benefit from improved margins and shorter payback periods, particularly for small and medium enterprises (SMEs) engaged in component fabrication and system integration. Lower input costs may enable manufacturers to offer more competitive pricing to developers and end-users, potentially increasing demand and production volumes. This could help stabilise supply chains and reduce reliance on imported components, especially in the context of global market volatility.

Farmers, meanwhile, will see direct financial relief under the PM-KUSUM scheme. A 5 HP solar pump, which currently costs around ₹2.5 lakh, will now be cheaper by approximately ₹17,500. At the scale of 10 lakh solar pumps, the cumulative savings for farmers could reach ₹1,750 crore. These savings are expected to make solar-powered irrigation more affordable, particularly in regions with limited access to grid electricity. By lowering upfront costs, the reform may also improve the viability of decentralised energy solutions such as mini-grids and solar water pumps, which are critical for rural livelihoods.

In addition to cost savings, the GST reduction could shorten payback periods for solar pump investments, improving returns for farmers and encouraging wider adoption. This is particularly relevant for smallholder farmers who often face liquidity constraints and depend on seasonal income. Cheaper solar pumps may also reduce dependence on diesel-based irrigation, lowering operational costs and contributing to cleaner air and reduced carbon emissions.

Together, the manufacturing and farming sectors represent key pillars of India’s renewable energy transition. By lowering costs and improving economic viability, the GST reform supports both industrial growth and rural empowerment. It also aligns with India’s broader climate and energy goals, including the target of 500 gigawatt (GW) of non-fossil fuel capacity by 2030.

Lower Goods and Services Tax on drones boosts industry clarity and adoption

Mumbai: Indian Government's decision to slash Goods and Services Tax (GST) on drones to a flat 5% marks a decisive correction in tax policy for a sector gaining strategic and commercial relevance. Until now, drones with integrated cameras were taxed at 18%, while personal-use models faced a steep 28% rate – a fragmented structure that created confusion and compliance burdens. The new uniform rate eliminates these disparities, offering clarity to manufacturers and users while signalling the government’s intent to streamline regulation around emerging technologies.

The most immediate benefit is reduced cost. With lower tax liability, manufacturers can offer drones at more competitive prices, making them more accessible to businesses and consumers. This is particularly relevant in sectors where drones are becoming essential – agriculture, infrastructure, logistics, mining and public safety. For instance, farmers using drones for crop monitoring or pesticide spraying will now face lower upfront costs, potentially accelerating adoption in rural areas where margins are tight and technology uptake has been slow.

The reform also resolves long-standing classification disputes. By eliminating the distinction between personal and commercial use, it provides policy certainty and reduces administrative overhead. This clarity benefits domestic manufacturers and importers, who previously had to navigate complex tax codes and risk penalties for misclassification. It also supports broader efforts to improve ease of doing business.

Strategically, the reduced GST aligns with national initiatives such as Make in India and Atmanirbhar Bharat. By lowering barriers to entry, the reform encourages domestic production and innovation in drone technology – not only in hardware but also in software development, data analytics and operational services. As demand grows, so too will employment opportunities across the value chain, from assembly lines to field operations.

Training and skill development stand to benefit as well. The exemption of GST on flight simulators and motion simulators, essential for pilot training, reduces costs for academies and airlines. This could lead to expanded training programmes and a more robust talent pipeline, addressing a key bottleneck in the sector’s growth.

Public services may also see gains. Government departments involved in surveying, disaster response and law enforcement increasingly rely on drones for efficiency and reach. Lower procurement costs could enable broader deployment, especially in remote or underserved regions, enhancing the state’s capacity to deliver services and respond to emergencies.

While the GST reduction is not a cure-all, it is a pragmatic step that addresses several structural challenges facing the drone industry. It simplifies taxation, lowers costs and aligns fiscal policy with technological priorities. As India positions itself as a global player in drone innovation, such measures will be critical in building a competitive and resilient ecosystem.

Rising credit stress slows retail and micro, small and medium enterprise loans

Mumbai: Despite supportive policy measures aimed at boosting credit growth, asset quality stress in retail and micro, small and medium enterprise (MSME) segments continues to constrain lending appetite among private banks and non-banking financial companies (NBFCs), according to ICRA’s latest credit outlook.

The report notes that loans to MSMEs and unsecured personal loans now account for 17% of the overall non-food credit of ₹184 trillion for banks as of July 2025. For NBFCs, these segments comprise approximately 34% of their total credit book of ₹35 trillion as of March 2025. This concentration has heightened lenders’ exposure to income shocks and demand-side vulnerabilities, particularly in sectors linked to exports and discretionary consumption.

Anil Gupta, senior vice president and co-group head at ICRA, said the stress in these segments has led to slower growth for private sector banks and NBFCs. “With improvement in economic activity post the Goods and Services Tax (GST) rate cuts, the growth appetite shall improve, which will support the credit growth,” Gupta added. However, ICRA remains cautious about the underlying asset quality risks, especially given the evolving geopolitical conditions and their second-order effects on borrower income and repayment capacity.

The report highlights that transport operators serving export-dependent industries such as apparel are facing lower capacity utilisation, which in turn affects their ability to service loans. Employees in these sectors are also vulnerable to liquidity pressures, impacting repayments on microfinance, personal and home loans. These dynamics are expected to manifest more visibly from the third quarter of FY2026, should growth remain subdued and tariff-related pressures persist.

Credit costs are projected to rise modestly in FY2026 – by up to 13 basis points for banks and 30 basis points for NBFCs compared to the previous fiscal. AM Karthik, senior vice president and co-group head at ICRA, noted that the impact would be more pronounced in non-housing segments. While lenders’ earnings may be cushioned by lower funding costs and adequate capital buffers, the outlook for microfinance institutions remains negative due to their heightened sensitivity to borrower income volatility.

The implications for the retail and MSME sectors are significant. Tighter credit conditions and cautious lending practices could limit access to working capital and personal finance, particularly for borrowers with limited formal income documentation. This may slow recovery in consumption and small business activity, even as broader economic indicators show signs of stabilisation.

Some mid-sized NBFCs are especially vulnerable, according to ICRA, due to low capital buffers and high borrower overdues. Their limited financial flexibility in raising equity or refinancing debt could amplify credit risk if stress persists. While larger institutions may absorb these pressures, smaller players could face earnings volatility and funding constraints.

While headline credit growth figures remain broadly positive, the underlying asset quality challenges in retail and MSME segments present a more nuanced picture. Policymakers and lenders alike will need to monitor these trends closely to ensure that credit expansion does not come at the cost of financial stability.

GST rate cuts to ease cash flow and sharpen MSME competitiveness

Mumbai: The recent rationalisation of Goods and Services Tax (GST) rates by the Government of India marks a targeted intervention to reduce input costs, improve working capital efficiency, and enhance the competitiveness of micro, small and medium enterprises (MSMEs) and the broader manufacturing sector. The measures, approved by the GST Council, address long-standing structural issues such as inverted duty structures and refund bottlenecks, particularly for small exporters and e-commerce consignments.

Among the most consequential changes is the removal of the value threshold for GST refunds on low-value exports. This amendment to Section 54(14) of the CGST Act, 2017 enables refunds for all exports made with payment of tax, regardless of consignment value. The reform is expected to significantly ease compliance for small exporters, especially those using courier or postal channels, and improve cash flow by unlocking refunds that were previously inaccessible due to value limits. By simplifying procedures and reducing working capital constraints, the move allows MSMEs and small sellers to participate more effectively in international trade.

The rate cuts themselves are broad-based, spanning sectors such as paper, leather, wood, textiles, food processing, toys, packaging materials, and commercial vehicles. For instance, GST on paper packaging, textiles, and leather has been reduced from 12–18% to 5%, directly lowering production costs and enabling more competitive pricing for exporters. Similarly, the reduction in GST on trucks and delivery vans from 28% to 18% is expected to reduce freight and logistics expenses, strengthening supply chains and improving margins across manufacturing and distribution networks.

The rationalisation also corrects inverted duty structures in key sectors like textiles and food processing, where input taxes previously exceeded output taxes, leading to refund delays and working capital blockages. By aligning rates more logically across the value chain, the reforms ensure smoother refund flows and reduce the financial strain on producers. This is particularly relevant for MSMEs, which often operate with limited liquidity and are disproportionately affected by refund delays.

Industry groups have broadly welcomed the changes, noting that faster refunds and rate adjustments will ease liquidity pressures and support domestic production. The reduction in GST on toys and sports goods from 12% to 5% is expected to incentivise local manufacturing and reduce reliance on imports, while also tapping into growing global demand. Eco-friendly products such as bamboo, bagasse and jute boards have also seen rate reductions, aligning fiscal policy with sustainability goals and global standards.

The cumulative effect of these reforms is a more predictable and efficient tax environment for manufacturers and exporters. By lowering input costs and streamlining refund mechanisms, the government has taken steps to reduce inflationary pressures and improve the viability of domestic production. These changes also support India’s ambition to become a global hub in sectors such as textiles, auto components, food processing and handicrafts.

Commerce Secretary Sunil Barthwal described the rationalisation as a decisive step in strengthening India’s manufacturing base and empowering MSMEs. He emphasised that the reforms deliver tangible benefits to producers, traders and exporters, reinforcing the broader vision of building an Atmanirbhar Bharat.

Affordable aquaculture inputs bring relief to grassroots producers

Mumbai: The GST Council’s decision to reduce tax rates across the fisheries value chain is set to ease financial pressure on a wide range of rural stakeholders. From fish farmers and aquaculturists to small-scale fishers, women’s self-help groups and cooperatives, the reforms offer tangible relief by lowering the cost of essential inputs and equipment. With the revised rates taking effect from September 22, 2025, producers are expected to benefit from reduced operational costs and improved viability. These changes come at a time when fisheries and aquaculture continue to expand rapidly, playing a vital role in rural employment and income generation across India.

Among the most consequential adjustments is the reduction of GST on essential aquaculture equipment and inputs. Diesel engines, pumps, aerators and sprinklers, all critical for pond management and hatchery operations, will now attract 5 per cent GST, down from the earlier 12 to 18 per cent. This change alone is likely to ease capital expenditure for fish farmers and cooperatives, many of whom operate on tight margins and limited access to formal credit.

Similarly, the GST rate on pond conditioning chemicals such as ammonia and micronutrients has been cut to 5 per cent. These inputs are vital for maintaining water quality and ensuring healthy fish growth. Lower taxation on such items reduces the cost of feed and farm-level practices, making aquaculture more accessible to small and marginal producers, including women-led self-help groups that have increasingly entered the sector through government-supported livelihood schemes.

The reforms also extend to seafood processing and value-added products. Prepared or preserved fish and shrimp, including exports, will now be taxed at 5 per cent instead of 12 per cent. This not only makes hygienically processed seafood more affordable for domestic consumers but also improves the competitiveness of Indian seafood in global markets. India’s seafood exports crossed ₹60,000 crore in 2023–24, with shrimp accounting for a significant share. Lower GST on these products supports processing units and job work services, which are often run by cooperatives and small enterprises in coastal and inland regions.

Fishing gear has also seen a rate reduction. Items such as rods, tackle, landing nets and butterfly nets – previously taxed at 12 percent – will now attract 5 per cent GST. This benefits small-scale fishers engaged in capture fisheries and recreational fishing, many of whom rely on affordable gear to sustain their livelihoods. The change is particularly relevant in states with large inland water bodies and coastal communities, where fishing remains a primary source of income.

Composting machines, used for producing organic manure and managing pond waste, are now taxed at 5 per cent. This supports sustainable aquaculture practices and aligns with broader environmental goals, while also reducing input costs for farmers who integrate fish farming with agriculture.

Taken together, these reforms represent a shift toward more inclusive taxation in the fisheries sector. By lowering the cost of inputs and equipment, the government has addressed a key barrier to entry and expansion for small producers. The impact is likely to be most visible in rural areas, where over 3 crore people depend on fisheries and aquaculture for their livelihoods. Many of these are informal workers, women entrepreneurs, and cooperative members who stand to benefit from reduced financial pressure and improved viability.

India produced nearly 195 lakh tonnes of fish in 2024–25, making it the second-largest fish producer globally. Yet the sector’s growth has often been constrained by fragmented supply chains and high input costs. The GST rationalisation helps correct these imbalances, offering a more predictable and affordable framework for producers and processors alike.

While the reforms do not address every structural challenge in the sector, they mark a clear step toward improving rural incomes and supporting the Blue Economy. By easing the financial burden on those at the base of the value chain, the changes reinforce the role of fisheries as a driver of employment, nutrition and export growth.

India’s seafood exports get EU boost with 102 listings, offset US setback

Mumbai: India’s seafood export sector has received a substantial boost with the European Union (EU) approving 102 new fishery establishments for export to its member countries. The move is expected to significantly increase export volumes, generate employment across coastal regions, and strengthen foreign exchange earnings at a time when Indian exporters are grappling with a steep 50% tariff imposed by the United States (US).

The EU’s decision follows a series of bilateral meetings held in Brussels and New Delhi, where senior officials from the Department of Commerce and Union Minister Piyush Goyal engaged with their European counterparts. The outcome reflects renewed confidence in India’s food safety and quality assurance systems, particularly the official control mechanisms implemented by the Export Inspection Council (EIC). These controls have been instrumental in ensuring compliance with the EU’s stringent regulatory standards, especially for aquaculture shrimps and cephalopods such as squid, cuttlefish and octopus.

The inclusion of these 102 establishments in the EU-approved list marks a notable expansion in India’s seafood export capacity. Exporters across coastal states and union territories now have greater access to one of the world’s most quality-sensitive markets, enabling them to diversify product offerings and deepen trade relationships. The timing is critical. With the US tariff hike dampening competitiveness in a key market, the EU’s endorsement offers a counterweight and a viable growth channel for Indian seafood producers.

According to the Ministry of Commerce and Industry, the development is expected to translate into tangible economic gains. Increased export volumes will likely spur job creation in processing, logistics and aquaculture, while higher foreign exchange inflows could help offset trade imbalances exacerbated by protectionist measures elsewhere. The Department of Commerce has reiterated its support for exporters through policy facilitation, infrastructure upgrades and capacity building initiatives.

The EIC and its affiliated agencies continue to play a central role in maintaining India’s reputation as a reliable supplier of high-quality seafood. Their efforts in traceability, hygiene compliance and certification have been key to securing international market access. The EU’s decision also signals a broader environment of mutual trust in product standards between the two regions – a foundation that could support future trade negotiations and sectoral cooperation.

While the US tariff remains a concern for Indian exporters, the EU’s approval of additional establishments offers a timely and strategic opportunity to rebalance trade flows. For India’s seafood industry, this development is more than a regulatory milestone – it is a gateway to sustained growth in a challenging global trade environment.

Cholesterol-based nanomaterials unlock quantum tech potential

Mumbai: Researchers at the Institute of Nano Science and Technology (INST), Mohali, have developed cholesterol-based nanomaterials that could serve as novel platforms for quantum technologies and spintronic applications. The work, led by Dr Amit Kumar Mondal and supported by the Department of Science and Technology (DST), demonstrates how a biomolecule typically associated with cardiovascular risk can be repurposed to manipulate electron spin, a quantum property central to next-generation electronics.

Dr Amit Kumar Mondal with his team
(Pic Courtesy: PIB)

The team’s approach leverages cholesterol’s intrinsic chirality and molecular flexibility to construct supramolecular frameworks capable of controlling spin orientation. By integrating metal ions into these organic structures, the researchers created nanomaterials that selectively filter electron spins. Crucially, both spin directions can be tuned within a single system, allowing for precise control over spin flow using chemical stimuli. This dual-direction control marks a significant step forward in the design of spintronic materials, which rely on the manipulation of electron spin rather than charge.

Spintronics, short for spin-based electronics, is a field that promises energy-efficient alternatives to conventional semiconductor technologies. Materials that can separate and guide electron spins with high fidelity are essential for developing memory devices, sensors, and quantum computing components. The INST team’s findings, published in Chemistry of Materials, show that cholesterol-based systems offer a chemically tunable route to spin control, potentially reducing the complexity and cost of device fabrication.

The research also underscores the broader potential of biomaterials in quantum applications. Unlike synthetic polymers or inorganic substrates, cholesterol offers a biologically derived, structurally versatile platform that can be modified with relative ease. This opens up possibilities for integrating spintronic functions into bioelectronic devices, where compatibility with living systems is a key requirement.

While the study remains at the materials development stage, its implications are far-reaching. The ability to engineer spin-selective pathways using simple chemical modifications could accelerate the deployment of spin-based components in commercial technologies. Moreover, the use of cholesterol, a widely available and well-characterised molecule, may simplify regulatory and manufacturing hurdles associated with novel quantum materials.

Visualising spintronics: Cholesterol-based nanomaterials
guide electron spin with chemical precision

The work reflects a growing interest in interdisciplinary approaches to quantum engineering, where insights from chemistry, biology, and materials science converge to address longstanding challenges in electronics. As quantum technologies move from theoretical constructs to practical systems, innovations like these will be critical in shaping their scalability and sustainability.

The INST team’s contribution adds a new dimension to the field, positioning cholesterol not just as a biological molecule but as a functional material with quantum relevance. Whether this leads to commercial spintronic devices or remains a foundational advance in materials science, it signals a shift in how researchers think about the building blocks of future electronics.

Readymade garment exporters with high US exposure brace for margin compression as 50% US tariff rate kicks in

Mumbai: Readymade garment (RMG) sector is set to witness a sharp slowdown in revenue growth, with Crisil Ratings projecting a halving to just 3–5% this fiscal. The trigger: a steep 50% tariff imposed by the US on Indian RMG imports, effective August 27, 2025.

The US, which accounted for a third of India’s $16 billion RMG exports last year, is expected to see its share drop to 20–25% as American retailers rework sourcing strategies. Exporters deriving over 40% of their revenue from the US are likely to be hit hardest, with profitability contracting by 300–500 basis points.

While domestic demand -- comprising three-fourths of sectoral revenue -- is expected to grow steadily at 8–10%, Crisil warns that oversupply and tariff-driven disadvantages could dent margins and credit metrics across the board.

Some relief may come from the UK, European Union, and UAE markets, which together form 45% of India’s RMG exports. The recently signed UK Free Trade Agreement (FTA) is expected to boost shipments later this fiscal.

According to Manish Gupta, deputy chief rating officer, Crisil Ratings, if the tariffs hold, RMG exports to the US will see a sharp decline. "In the first quarter of this fiscal, total exports from India rose ~10% on-year to ~$4 billion, with exports to US recording a ~14% growth during the same period. The trend is expected to sustain through August 26, 2025, till the enhanced tariffs kick in.

"Post 50% tariffs, Indian exports to the US may be minimal, despite limited capacity of competing nations in value-added garments and lead time taken by big-box retailers in the US to re-align their sourcing arrangements. Overall, we expect the share of the US in India's RMG exports to fall from 33% last fiscal to 20-25% this fiscal."

Export-driven sectors in India struggle as global demand weakens

Mumbai: India’s export-oriented industries are facing sustained pressure amid weakening global demand, with sectors such as agro-chemicals, textiles, auto components, seafood, cut and polished diamonds, and information technology (IT) services reporting subdued performance. According to ICRA’s latest quarterly outlook, the impact of ongoing geopolitical tensions and elevated US tariffs continues to weigh heavily on external trade sentiment, even as domestic consumption shows signs of resilience.

The credit rating agency expects India Inc. to post modest year-on-year revenue growth of 5–6% in the second quarter of FY2026, broadly in line with the 5.5% increase recorded in the first-quarter. This growth is largely attributed to firm rural demand and structural shifts favouring organised players and premium product categories. However, the export-facing segments remain a drag on overall performance, with limited visibility on near-term recovery.

Kinjal Shah, senior vice president and co-group head – Corporate Ratings at ICRA, noted that while rural consumption has held up, urban demand is yet to recover meaningfully. Despite supportive factors such as income tax relief and easing food inflation, sentiment remains cautious. Shah added that the anticipated rationalisation of Goods and Services Tax (GST) rates could offer some stimulus, but uncertainty around its structure may lead to deferred discretionary purchases, potentially pushing demand into the latter half of the fiscal year.

ICRA’s analysis covers 585 listed non-financial companies, whose aggregate performance in the first-quarter FY2026 reflected the broader trends. Revenue growth was driven by consumption-linked sectors including consumer durables, retail, hotels, and gems and jewellery, as well as infrastructure-oriented industries such as cement, capital goods, and construction. These segments had posted muted results in the same quarter last year due to election-related disruptions.

Sequentially, however, revenues declined by 4.1% in the first-quarter following a seasonally strong fourth-quarter. The drop was led by sectors such as real estate, construction, capital goods, hotels, and airlines. Export-heavy industries, meanwhile, continued to struggle with weak demand and pricing pressure. In particular, agro-chemicals and textiles have been hit by inventory overhangs and sluggish orders from key markets, while seafood and diamond exports remain vulnerable to trade restrictions and shifting consumer preferences abroad.

The IT services sector, traditionally a strong performer, has also seen a moderation in growth due to delayed client spending and cautious hiring in developed markets. Auto component manufacturers are grappling with lower export volumes and margin compression, exacerbated by currency volatility and elevated input costs.

Despite these challenges, India Inc.’s operating profit margins are expected to remain steady in the 18–18.2% range in the second-quarter, supported by softening commodity prices including crude oil and coal. In the first-quarter, margins stood at 18.1% year-on-year, with gains in telecom, cement, and real estate offset by declines in auto, consumer durables, and metals and mining. On a sequential basis, margins fell by 28 basis points, with sectors such as hotels, power, and capital goods affected by cost pressures and the early onset of monsoons.

Interest coverage ratios are projected to improve slightly to 4.9–5.1 times in the second-quarter, up from 4.9 times in the first-quarter, aided by festive season demand and gradual transmission of policy rate cuts. However, ICRA notes that higher working capital requirements have led to increased interest costs, particularly in sectors with elevated inventory levels and delayed receivables.

Private sector capital expenditure remains cautious, with the uncertain global environment prompting delays in broader investment cycles. Nonetheless, select areas such as electronics, semiconductors, and electric vehicles continue to attract capital, supported by targeted policy incentives and long-term growth prospects. Government spending is expected to provide some support to overall investment activity, although the scope for further expansion may narrow in subsequent quarters following front-loaded outlays in the first-quarter.

The outlook for export-oriented sectors remains clouded by external risks, and any meaningful recovery will depend on stabilisation in global trade conditions and improved demand from key markets. In the interim, domestic consumption and structural shifts within India’s economy are likely to remain the primary drivers of corporate performance.

US tariff hike puts $19 billion of MSME exports at risk; textiles, diamonds, seafood most exposed

Mumbai, August 20, 2025: India’s micro, small and medium enterprises (MSMEs) are bracing for a sharp blow as the United States doubles import tariffs on a wide range of Indian goods starting August 27. The move raises the total duty to 50%, threatening the competitiveness of sectors where MSMEs dominate both production and export volumes.

According to Crisil Intelligence, textiles, gems and jewellery, seafood and chemicals, which together account for nearly a quarter of India’s exports to the US, are among the worst hit. MSMEs contribute over 70% of output in these industries, and many operate on thin margins with limited ability to absorb cost shocks.

The Tirupur garment cluster, responsible for over 30% of India’s readymade garment exports, faces a steep climb. With 30% of its shipments headed to the US, the new tariff regime pushes the effective duty on Indian garments to 61%, compared to just 31% for competitors in Bangladesh and Vietnam. After two years of sluggish growth, the sector’s modest recovery now hangs in the balance.

Surat’s diamond polishing units, which account for more than 80% of India’s diamond exports, are similarly exposed. Diamonds make up over half of India’s gems and jewellery exports, and the US is the largest buyer, taking in nearly a third. A prolonged downturn could impact thousands of MSMEs clustered around Surat.

Seafood exporters face a tough battle too. With tariffs doubling to 50%, Indian suppliers will struggle to compete with Ecuador, which enjoys a lower 15% duty and proximity to the US market.

In chemicals, MSMEs with a 40% market share are disadvantaged against Japanese and South Korean firms that face lower tariffs and have stronger trade ties with the US.

Auto component MSMEs may see a more limited impact. While the US accounts for just 3.5% of India’s total production, certain segments, especially gearbox and transmission parts, have up to 40% exposure and could feel the pinch.

Crisil Intelligence estimates that about $19 billion worth of exports across textiles, chemicals, seafood and auto components are now at risk. Domestic demand is projected to rise by $10 billion in these industries, offering partial relief. In gems and jewellery, rising gold prices and steady domestic consumption may cushion the revenue impact, even if export volumes decline.

Some sectors remain insulated. Pharmaceuticals, which represent 12% of India’s exports to the US, are exempt from the new tariffs. Steel MSMEs are also largely unaffected, as they produce long products while US imports are concentrated in flat products. The US accounts for just 1% of India’s steel exports.

Still, the timing of the tariff hike is challenging. Exporters are already grappling with slowing global demand and shrinking margins. For small businesses with limited pricing power, the ability to withstand further cost pressures is thin. To navigate the turbulence, diversification will be key.

India’s recently concluded trade agreement with the United Kingdom offers a potential lifeline, especially for MSMEs in textiles, seafood, gems and jewellery, leather and pharmaceuticals. The deal enhances competitiveness against regional rivals and could help offset losses in the US market. Ongoing negotiations with the European Union may further support market diversification.