A new report by Bank of Baroda reveals that Indian companies are borrowing less and instead using their own earnings to fund growth. The report studied the debt levels of non-financial companies and found that debt increased from ₹20.7 lakh crore in FY21 to ₹22.6 lakh crore in FY25. This means debt grew at a slow rate of just 2.9% per year, much lower than the 8.7% annual growth seen between FY15 and FY20.
Debt growth has been uneven over the years. It rose by 5.9% in FY21, dropped to 1.4% in FY22, went up again to 5.7% in FY23, and then fell by 0.7% in FY24. The fall in FY24 was mainly because many companies paid off their loans to reduce their debt.
Interestingly, even though companies borrowed less, they still invested well in fixed assets like buildings and equipment. This shows they used their own profits, known as internal accruals, rather than taking loans.
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The report also looked at how different industries are borrowing. Sectors like power, oil, telecom, and infrastructure still have high debt levels. Out of the 25 sectors studied, 13 had a debt growth rate higher than the 2.9% average. Telecom, power, and infrastructure saw strong debt growth due to government spending and new projects.
The report also found that corporate debt is now less linked to the country’s overall economic growth (measured by Gross Value Added or GVA). This is another sign that companies are choosing to grow using their own money instead of depending on loans.
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Indian companies are becoming smarter with money—borrowing less, paying off old loans, and using profits to grow.
