BofA Flags Corporate Caution: Indian Firms Hit Pause on Expansion, Prioritize Debt Reduction

Bank of America (BofA) analysts are cautioning that Indian corporates are holding back on expansion, shifting attention instead toward reducing debt and refinancing amid a volatile economic backdrop.

As of today, BofA analysts, led by Shankar Subramaniam, the bank’s head of India, report that Indian companies appear to be stepping back from new capacity investments, citing uncertainties in both domestic demand and the global trade environment. Against this backdrop, firms are increasingly prioritizing debt repayment and refinancing strategies over growth through capital expenditure.

The cautious stance is rooted in several factors. Companies remain unsure about the trajectory of domestic consumption and global trade, making expansion plans appear risky. Rather than taking on fresh debt or funding new projects, corporates are choosing to manage existing liabilities and strengthen their balance sheets. Persistent concerns over inflation, slowing global growth, and geopolitical instability are further prompting companies to adopt a conservative financial strategy.

The findings from BofA align with broader corporate trends in India. A recent Bank of Baroda report highlighted that corporate debt growth in FY25 slowed significantly to just 2.9 percent, as companies increasingly relied on internal funding rather than external borrowing. This shift underscores a growing emphasis on financial sustainability and a preference for self-reliant strategies over debt-fueled growth.

This environment of caution has wider implications. With firms pausing expansion, sectors such as manufacturing and infrastructure may experience subdued capital investments in the near term. The slowdown in expansion spending could also weigh on allied industries like construction, machinery, and industrial raw materials. Investors and analysts may interpret this shift as a sign of heightened uncertainty, tempering near-term optimism around India’s corporate growth prospects.

While this conservative approach may curb short-term momentum, it could strengthen corporate India’s financial foundation in the long run. By prioritizing deleveraging and disciplined refinancing, companies are improving their credit profiles and reducing risk exposure. This measured strategy could position them to capitalize on opportunities more effectively once economic conditions stabilize.

BofA’s report paints a picture of Indian corporates adjusting to an unpredictable economic environment. Their focus on resilience over expansion reflects a broader recalibration of priorities, and while growth may temporarily slow, this period of consolidation could lay the groundwork for more sustainable, long-term gains.