In a world starved of good economic news, India's corporate sector is making headlines for all the right and perhaps some of the wrong reasons. Over 300 of India's leading listed companies are now debt-free. Together, they have slashed debt by ₹48,000 crore and doubled their cash reserves from ₹21,000 crore to ₹50,000 crore within FY25. This seems, at first glance, a story of maturity, prudence, and financial discipline.
Yet a deeper question lingers beneath this veneer of fiscal health: Can an economy grow at 7% when its most capable corporates choose safety over scale, liquidity over leverage, and caution over conviction?
A Nation Ready, A Corporate Sector Hesitant
India's macroeconomic narrative remains robust. With GDP projected to grow at 6.5%–6.8% in FY26 (RBI estimates), forex reserves above USD 650 billion, and continued reforms across infrastructure and digital ecosystems, the scaffolding for sustained growth is intact.
The State Bank of India's Ecowrap (June 2025) captures this paradox succinctly: "India stands at the threshold of a historic opportunity. Yet the private sector's risk aversion casts a long shadow on realizing this potential."
Despite strong fundamentals, private sector capex remains anaemic. Aggregate capital expenditure grew by 20% in FY25 but slowed dramatically to 6% in H2 FY25 (Nuvama Research). The divergence between India's macro optimism and corporate micro caution is now too glaring to ignore.
Fortress Balance Sheets and the Psychology of Corporate Caution
The unprecedented accumulation of cash reflects deeper post-pandemic boardroom psychology. Corporate India, bruised by the uncertainties of COVID-19, supply chain disruptions, and rising geopolitical tensions, has recalibrated its appetite for risk. According to McKinsey's Global CFO Pulse (2025), over 72% of CFOs in emerging markets prioritize liquidity preservation over expansionary capex, citing market volatility and demand uncertainty.
Balance sheets are cleaner. Interest coverage ratios have improved. Yet this is not capital waiting for opportunity; it is capital hiding from uncertainty. RBI's Financial Stability Report (June 2025) confirms that corporate debt growth has stalled at 2.9% , the slowest in five years. Liquidity now constitutes 12% of total corporate assets, a record in Indian corporate history.
"Liquidity buffers must enable ambition, not institutionalize caution." - RBI Governor Shaktikanta Das
Demand Ambiguity and Margin Pressures Reinforce Inertia
Consumption remains India's Achilles heel. Household spending, constituting nearly 60% of GDP, shows uneven recovery. Rural demand, in particular, lags amid stagnant wages and inflationary pressures. Consumer durables, automotive, and discretionary sectors reflect this hesitation.
PAT growth among BSE500 firms slowed from 21% in FY24 to 9 - 10% in FY25 (Economic Times, June 2025). Margin compression, input cost volatility, and subdued topline growth have fostered an environment where CFOs prioritize capital preservation over bold investments.
SBI Ecowrap's analysis (2025) is clear: "Without a sustained consumption revival, private investment will remain hostage to weak demand signals."
Capital Markets Booming, Real Investment Stagnating
Paradoxically, India's capital markets are thriving. ₹1.2 lakh crore was raised via IPOs and QIPs in FY25. Yet these funds fuel balance-sheet fortification, share buybacks, and dividends, not fresh capacity. Dividends grew 11% in FY25, surpassing profit growth, reflecting shareholder appeasement over capex ambition.
This mirrors global trends where liquidity is abundant but real investment lags. S&P Global's India Outlook (2025) warns: "India risks a liquidity trap where capital strengthens balance sheets but weakens competitiveness if left idle."
India's corporate debt-to-GDP ratio, at 55%, remains well below China's 160%, indicating ample headroom. Yet that headroom is unutilized.
Bifurcation Within India Inc.: The Peril of Uneven Growth
Corporate India's caution is not monolithic. Large conglomerates - Reliance, Adani, Tata drive debt upticks in infrastructure and energy, accounting for the bulk of ₹37.4 lakh crore in corporate debt (up 6% in FY25). In contrast, mid-cap and SME segments remain stagnant, constrained by weak demand, limited credit access, and high risk aversion.
NCAER's 2025 Mid-Market Survey highlights: "The divergence within India Inc. entrenches inequality, stalling employment elasticity and industrial depth."
This two-speed corporate reality threatens to hollow out India's industrial ecosystem, where innovation and job creation depend on mid-tier dynamism, not just conglomerate consolidation.
Global Volatility and Supply Chains Fuel Defensive Stances
External headwinds continue to shape Indian corporate behavior. Geopolitical flashpoints - Ukraine, Red Sea, Taiwan disrupt supply chains and commodity flows. Energy prices remain volatile. The IMF's Global Economic Outlook (2025) projects sub-3% global growth, pressuring export-driven sectors.
Indian firms, especially exporters, hoard liquidity as a hedge against these uncertainties. Yet this defensive liquidity feeds a cycle where underinvestment today risks future competitiveness. World Bank's Global Prospects (2025) warns: "Emerging markets that delay capex amid volatility risk losing their structural advantage in supply chain re-alignments."
Sectoral Disparities - Winners, Losers, and the Emerging Blind Spot
The uneven caution across sectors is not merely anecdotal; it reflects deeper structural imbalances in India's economic architecture.
IT, FMCG, and Pharma continue to thrive on cash-rich models, global demand, and operational efficiencies. Their business strategies now favor capital-light, margin-focused growth, which, while profitable, does little to create large-scale employment or catalyze ancillary industries.
Infrastructure, Renewables, and Green Energy are cautiously expanding, primarily because of government-backed incentives and assured long-term returns. However, even here, capital deployment is measured, reflecting concerns over regulatory consistency, environmental clearances, and financing costs.
Manufacturing, Real Estate, and MSMEs, sectors traditionally pivotal to job creation and economic breadth, remain largely subdued. Weak demand signals, rising input costs, and constrained credit flows, particularly post the NBFC crisis, have dampened ambitions.
KPMG India's Sector Watch 2025 observes: "Manufacturing's cautious capex stands in contrast to policy ambitions of Make in India and Atmanirbhar Bharat. Without decisive stimulation, these sectors risk long-term stagnation."
Moreover, PLI schemes, though transformative in segments like electronics and defense, have not sufficiently catalyzed a broader industrial renaissance. Sectors such as AI, semiconductors, and critical minerals remain under-penetrated due to fragmented incentives and slow policy follow-through.
The cumulative risk is systemic: a skewed recovery that benefits a few sectors while leaving others trapped in inertia weakens India's ability to achieve balanced, sustainable growth.
Policy Architecture - From Stability to Growth Facilitation
While public capex has driven India's infrastructure resurgence, private capital remains the missing multiplier. The absence of private sector confidence stems less from capital scarcity and more from gaps in policy architecture, regulatory predictability, and demand assurance.
India's policies have stabilized the macroeconomy, but a clear roadmap is now needed to transition from financial prudence to growth facilitation:
Credit Guarantees: Mid-tier firms, particularly MSMEs, require state-backed credit enhancement to de-risk lending, as recommended in SIDBI's Annual Review 2025.
PLI Expansion: Beyond existing sectors, the government must extend Production-Linked Incentive schemes to sunrise industries such as AI, green hydrogen, advanced semiconductors, aerospace components, and quantum computing. This aligns with NITI Aayog's Vision 2047 strategic priorities.
Demand Stimulation: Tax rationalization, GST simplification, rural income support, and targeted urban employment schemes can reignite consumption the missing fuel for private sector confidence.
Regulatory Consistency: Recent reversals in policies (e.g., EV subsidies, data governance norms) have spooked investors. A long-term, bipartisan regulatory environment is critical.
The RBI's June 2025 Bulletin advises: "Having achieved stability, policy must now pivot towards catalyzing private enterprise through targeted interventions that bridge demand and confidence deficits."
India cannot afford to leave its industrial resurgence solely in the hands of the state. Public ambition must be matched by private conviction, and policy is the bridge between the two.
Opportunity Cost - India's Global Window is Narrow and Closing
The world's supply chains are in flux. The global pivot away from China towards diversified, resilient sourcing hubs presents India with a time-sensitive opportunity. However, nations like Vietnam, Indonesia, and even Bangladesh are aggressively positioning themselves with more agile policies, faster clearances, and targeted FDI incentives.
India's hesitation risks being interpreted globally not as prudence but as incapacity. This perception could have long-term repercussions on FDI flows, supply chain integration, and global competitiveness. In sectors like semiconductors, AI, defense manufacturing, and green technologies, India stands at a crossroads.
Brookings India (2025) warns: "India's window to embed itself in strategic global value chains will not remain open indefinitely. Those who act now will shape the next industrial order."
NITI Aayog's Vision 2047 emphasizes that missing this window would set back India's ambitions in technological self-reliance, energy security, and global economic influence by a decade.
Furthermore, the opportunity cost is not just economic but geopolitical. A passive India risks ceding strategic space to smaller, more agile competitors, undermining its aspirations for a larger role in shaping global norms, supply chains, and emerging technologies.
Imperative for growth
India's corporate prudence was a necessary response to the shocks of the pandemic, financial crises, and geopolitical turmoil. However, the time for defense has passed. India's macroeconomic runway is clear: robust growth projections, solid reserves, demographic momentum, and proactive public investment. Yet the private sector remains locked in a post-crisis mindset, hoarding liquidity at the expense of long-term competitiveness.
The world will not wait. The next five years will define the winners in AI, green energy, advanced manufacturing, and defense technologies. If India Inc. chooses caution over calculated ambition, the opportunity will slip not to larger powers but to smaller, nimbler economies already accelerating ahead.
As Nandan Nilekani aptly captures the moment: "India has built the runway. The question now is whether our corporates will build the aircraft."
The imperative is clear and urgent:
Transition from financial defense to strategic offense.
From liquidity hoarding to leadership capital deployment.
From safe balance sheets to visionary investments.
From short-term shareholder appeasement to long-term national competitiveness.
Leadership is not born from caution. It is forged through conviction, foresight, and calculated risks. If India Inc. does not rise to this challenge now, it risks not merely slowing India's growth but diminishing its place in the world order of the next decade.
The future belongs to those who act decisively today, not those who reflect too long on the risks tomorrow.
[Major General Dr. Dilawar Singh, IAV, is a distinguished strategist having held senior positions in technology, defence, and corporate governance. He serves on global boards and advises on leadership, emerging technologies, and strategic affairs, with a focus on aligning India's interests in the evolving global technological order.]
