Goldman Sachs analyzed the flow of funds to Corporate India across various domestic and foreign channels, thus far in FY09.
Overall, the flow of funds to the commercial sector has declined by US$19.2bn in FY09 compared to FY08, according to recently released data by the Reserve Bank of India (RBI). All major foreign sources of funds, barring foreign direct investment (FDI), showed a decline. FDI into India has been very strong despite weak global conditions, thereby illustrating continued interest in the structural growth potential.
External Commercial Borrowings, which are long-term in nature, fell by more than half, while external short-term credit of which generally more than 90% is trade credit, fell by US$8 billion from last year, to a mere US$2.5 billion in the April-November months.
The reliance of companies on bank credit has increased to 61% of total funds available this year from 45% last year. Public-sector banks have shown a rapid increase in credit, while private-sector banks’ credit deployment has shrunk. In FY10, Goldman expects bank credit to remain the dominant source of credit for the commercial sector.