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Interest Rates

The Indian corporate sector has managed to withstand elevated interest rates with limited stress, as indicated by stable interest incidence and high interest cover. Despite rising policy rates, interest expenses for listed companies declined in 2023-24, and corporate performance showed a rebound with 16% GVA growth. Overall, the data suggests that strong balance sheets and effective management have mitigated the impact of interest rate hikes, with other factors likely influencing corporate performance more significantly.

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11 views1 page

Interest Rates

The Indian corporate sector has managed to withstand elevated interest rates with limited stress, as indicated by stable interest incidence and high interest cover. Despite rising policy rates, interest expenses for listed companies declined in 2023-24, and corporate performance showed a rebound with 16% GVA growth. Overall, the data suggests that strong balance sheets and effective management have mitigated the impact of interest rate hikes, with other factors likely influencing corporate performance more significantly.

Uploaded by

rautmm.civil
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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https://gemini.google.

com/app/1972492258efa763

Okay, I have reviewed the three images you uploaded. Here's a macroeconomic
summary focusing on the impact of elevated interest rates on the Indian corporate
sector, suitable for your IIMK writing:

Overall Impact: Limited Stress


 Despite rising policy rates, the Indian corporate sector appears to have
weathered the increase in interest rates without significant stress.
 This is evidenced by a high interest cover and a relatively low interest
incidence.
Interest Expenses and Borrowing Costs:
 While the RBI raised policy rates from May 2022, the interest expenses of
listed companies did not increase correspondingly. In fact, they declined in
2023-24.
 The weighted average lending rates (WALR) on fresh rupee loans from
scheduled commercial banks (SCBs) increased, but the overall interest
incidence for non-finance companies remained relatively stable.
 Borrowing growth has been slow since 2020-21.
Corporate Performance:
 The gross value added (GVA) of listed companies grew by a tepid 4.3% in
2022-23, partially as a correction to higher growth in the preceding years.
However, it rebounded strongly with 16% growth in 2023-24.
 The average GVA growth during the period of elevated interest rates (around
10%) was higher than the average growth in the ten years prior to that.
Unlisted Companies:
 Data for unlisted companies up to fiscal year 2022-23 also indicates rising
interest cover and falling interest incidence, similar to the trend observed in
listed companies.
Key Takeaways:
 The increase in policy rates does not appear to have significantly impacted
the average borrowing costs or the growth of the Indian corporate sector.
 The corporate sector's strong balance sheets and efficient management of
interest expenses have allowed them to absorb the rate hikes effectively.
 The data suggests that factors other than interest rates may be playing a
more significant role in driving corporate performance.
Would you like me to elaborate on any of these points or provide additional analysis?

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