Charu Bhatia | Jaipur | Business Remedies | India Inc is back in expansion mode. From infrastructure and renewable energy to aviation, telecom and new-age manufacturing, corporate balance sheets are swelling again, and so is borrowing. With interest rates stabilising after a tightening cycle and credit growth remaining robust, a key question emerges: are Indian corporates leveraging prudently for growth, or inching towards excess? Over the past few years, corporate India underwent a significant deleveraging phase. Many large groups reduced debt, improved cash flows and cleaned up balance sheets after the twin shocks of the banking NPA crisis and the pandemic. As profitability rebounded and capital expenditure revived, companies regained the confidence, and the lender appetite, to borrow again.
Bank credit to industry has seen steady growth, particularly towards sectors such as infrastructure, power, roads, real estate and MSMEs. Corporate bond issuances have also picked up, with firms locking in funds for expansion, acquisitions and capacity addition. For capital-intensive sectors, leverage is not inherently negative; in fact, debt can accelerate growth when cash flows are predictable and returns exceed borrowing costs. However, the pace and quality of borrowing matter.
Analysts note that while aggregate corporate leverage ratios remain lower than pre-2018 peaks, sector-specific stress risks are emerging. Capital-heavy industries with long gestation periods, such as renewable energy, airports and large-scale manufacturing, depend heavily on stable policy regimes and consistent demand. Any disruption, whether regulatory or macroeconomic, can strain repayment cycles. Another concern is global volatility. With geopolitical tensions, fluctuating commodity prices and uncertain export demand, revenue visibility for some sectors remains uneven. If global interest rates remain elevated longer than expected, refinancing risks could increase for companies with external commercial borrowings.
That said, there are important differences from the previous debt cycle. Banks today operate under tighter regulatory oversight, improved risk assessment frameworks and better capital buffers. Corporate governance norms have strengthened, and investors are more vigilant about leverage metrics, debt servicing capacity and return on capital employed. Moreover, much of the current borrowing appears linked to productive capex rather than speculative diversification. Government-led infrastructure push and manufacturing incentives have also created clearer revenue pipelines for private players. The broader takeaway: Indian corporates are leveraging again, but not recklessly, at least for now. The real test will lie in execution. If projects generate timely cash flows and macro conditions remain supportive, debt-fuelled growth could power India’s next expansion cycle. If not, balance sheets may once again come under pressure.
