It is the average Indian who will suffer if the big companies default on their debt repayments. There is also something unnoticed or unremarked in the report. The so-called operating profit is calculated after deducting operating expenses from the income. These expenses include sustaining the high-flying, luxury life styles of the company's promoters and executives, and the fat salaries and bonuses they enjoy. Liberalization led to removing the cap on executive salaries, and now we have many of them earning astronomically high incomes in various guises, some of them offered in ways that do not attract tax. Unless private companies show greater maturity in handling their finances, they should be blacklisted by banks.
If you continue to chase Inflation rate target by raising interest rates, which was not being done by RBI when these corporates took loans, many more Kingfishers will soon get created, whether you like it or not, and when cost of production gets affected because of rising interest outgo, who do you think will get affected? It is the end consumer because these increased costs will eventually be passed on to them. Net Effect? Inflation will rise over the long term. Additionally, goods produced in terms of quantity will go down because of a relative lack of demand. Again, what is the effect - the GDP of the country will go down and head towards recession. Only thing one can hope is, that you have not already caused irreparable damage by your initial rate increases to Small and Medium industries, as per Mr. Swamy, and from what now looks like, to also larger companies. I know you have the luxury of debating the correctness of your actions from classrooms in the US, but unfortunately, the common Indian will continue to suffer as a result of your policies.
