India’s GDP and Reduction in Interest Rates.. Possible?

March 27, 2016

A report published this week by India Ratings says that 178 out of 500 top corporateborrowers in India had an interest coverage ratio on their debt of less than1:1. The amount of debt affected is 8.1 trillion rupees (about $27 billion). The companies most affected are said to be in construction, mining and power generation, all sectors closely linked to the essential programme of infrastructure development on which the GDP growth targets depend. With growth in annual profits anticipated at about 8% over the next few years there will be a lengthy healing process and quite a few sick companies could succumb, putting pressure once again on banks’ capital ratios. In such circumstances, the hoped-for reduction interest rates seem very unlikely.

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