Corporate India is facing increasing borrowing costs given the rise in bank lending rates, potentially dampening industrial production and revival in domestic demand going forward, says a report.

According to a Dun & Bradstreet (D&B) report, high borrowing costs and a weakness in the rupee is expected to impact corporates, while uncertainties in the global market has the potential to derail the global growth story.

According to Arun Singh, Lead Economist, Dun & Bradstreet India, while borrowing costs for companies are rising given the increase in bank lending rates, a weak rupee has also added to the borrowing woes of corporates sourcing funds from the global markets.

“The rise in lending rates in general and borrowing costs in specific can dampen industrial production and the revival in domestic demand,” Singh said. Meanwhile, hedging costs have increased and dollar loans have become costlier.

“On top of that, we have heightened uncertainties in the global market, which has the potential to derail the global growth story,” Singh added.

On the prices front, D&B expects CPI inflation to be in the range of 3.7-3.9 per cent and WPI inflation to be in the range of 4.8-5 per cent during August this year. D&B expects the Index of Industrial Production (IIP) to have grown by 6.8-7.2 per cent during July 2018.

The report said the government should focus on strengthening the “macro economic stability of India” owing to the rising current account deficit and stress in the banking sector.

“The various policy initiatives taken by the government, should help in achieving the same and until then the need for reforms will remain the topmost priority for the Central Government,” Singh added.

Related Topics
comment COMMENT NOW