Non-financial companies’ addition to net fixed assets rose almost 12% in 2017-18, the highest rate of growth in the last four years. Chart 1 shows the growth rate since 2011-12. It also shows that the growth rate in financial investments by companies has come down, another indication that they are no longer in wait and watch mode but have instead started to deploy their funds in capex.

Note, however, that the rise in capex is mostly from companies’ own funds, as Chart 2 shows that growth in corporate borrowing has come down drastically.

The restraint on borrowing has led to an improvement in the financial position of companies, an example of which is the rise in their interest cover (see Chart 3). This increase shows an improvement in the ability of non-financial companies to service their debt.

At the macro level, the strengthening in company balance sheets and the flushing out of non-performing assets from banks should begin to ameliorate the twin balance sheets problem that has plagued the Indian economy in the last few years.