India’s corporate sector delivered 13% income growth in 3Q FY 2026, but the headline performance figure conceals growing pressure beneath the surface.

The pattern: Excluding banking, financial services, and ins. firms (BFSI), revenues rose 11.7% and net income climbed 14.6% y-o-y, the Hindu Businessline reports. This upturn was supported by cuts in indirect taxation rates that lifted demand for automobiles and fast-moving consumer goods (FMCG). This demand-led boost, however, is increasingly being offset by rising costs and regulatory headwinds.

Details: Income growth slowed sequentially as margins came under strain. Rising prices of coal, industrial metals, and semiconductors pushed up input costs, while one-time provisions linked to implementing the new labor code added to the drag. As a result, gross margins for non-BFSI companies declined by 18 basis points during the quarter.

Why it matters: The implementation of the New Labour Codes for major IT players took a cumulative INR 54 bn one-time charge this quarter (INR 21.3 bn for Tata Consultancy Services and INR 12.9 bn for Infosys) as they restructured gratuity and leave encashment provisions to meet the new 50% wage definition, the Economic Times reports. A 2% increase in India employee costs could cut FY 2027 earnings estimates by 2-4% for IT firms.

What’s next? Autos and FMCG are expected to sustain momentum into 4Q, while cement, steel, and banks show improving demand trends, even as input and energy costs pose near-term risks.

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