Rising interest rates will add to corporate borrowing costs, with the immediate impact visible on working capital loans. Other income will increase, too, as treasury investments will earn more interest.
Also see | Money is no more cheap (PDF)
In fiscal 2010, operating profit played a bigger role in driving performance. In fiscal 2011, while operating profit growth was good, other income rose at a faster rate. Worryingly, in the March quarter, interest payments rose at a sharply higher pace , while other income growth slowed, too. With the Reserve Bank of India’s current rate hike, that trend may continue in fiscal 2012.
Graphic by Yogesh Kumar/Mint
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