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Ajay Goel is a national rank-holder as both a Chartered Accountant and a Company Secretary and serves as Group Chief Financial Officer of Vedanta Limited, one of India’s largest natural‑resources companies. He brings more than two decades of finance leadership at global corporations including General Electric, Nestlé, Coca‑Cola and Diageo. At Vedanta, his responsibilities span capital allocation, performance‑enhancement strategy, investor relations and financing of large‑scale industrial growth.
In a recent e-mail with M R Yuvatha, Senior Correspondent, siliconindia, Ajay Goel shared his perspective on what India's corporate profit table reveals about the cost of capital, and why deepening capital markets has become an economic priority.
Read India Inc.'s latest results in one line, the country's most profitable companies are now its banks. One of India’s largest PSU banks reported earnings exceeding Rs 80,000 crore, while a leading private sector bank delivered over Rs 73,000 crore in earnings. Both comfortably out-earned TCS, India's largest software exporter, which earned just over Rs 49,000 crore - SBI alone made more than TCS and Infosys put together. For two decades the top of the profit table belonged to the software firms. It no longer does.
This is, in part, a good story. Indian banks are well run, their balance sheets are cleaner, and a serious digital push has lifted their efficiency. They have earned the credit. But the table can be read another way. When the institutions that lend money out-earn the ones that build, manufacture and export, the signal is about price - the price of capital across the economy. And that price is paid by everyone else.
Why Lenders Sit at the Top
Indian banks earn returns on equity of 16 to 20 percent. That is not principally a reward for risk; it reflects a seller’s market. India's corporate bond market is just 18 percent of GDP, against well over 100 percent in the United States. More than 80 percent of issuance sits in the highest rating grades, and almost all of it is privately placed. A large company can occasionally raise debt directly, a mid-sized firm or an MSME cannot. With the capital-markets exit effectively closed, the banking channel becomes practically the only road.
The consequence is a high cost of capital for the whole economy. Indian corporates operate at a weighted average cost of capital of 10 to 11 percent, against 6 to 8 percent for developed-market peers. Across government, banks, NBFCs and bonds, India pays close to Rs.50 lakh crore in interest every year - more than 15 percent of GDP, where mature economies spend 6 to 10 percent. That three-to-four-percentage-point gap is, in effect, a tax on growth ambition.
The Cost to the Real Economy
A high hurdle rate quietly shrinks the universe of viable projects. Capital formation drives 70 to 80 percent of productivity growth in emerging economies; India's investment rate, near 32 percent of GDP, needs to climb towards 36 percent to sustain 8 percent growth and expensive capital works directly against that climb. The burden also falls unevenly. Asset-light services absorb it easily, while the capital-heavy sectors that build industrial depth and create organised jobs - infrastructure, manufacturing, energy - carry the full weight.
Natural resources are capital-intensive industry. They run on large balance sheets and multi-year build cycles; a single percentage point on the cost of capital changes what we can build and how many jobs it creates. We manage it through cost discipline and tight capital allocation - but no company can offset a structurally expensive economy. When too much national income flows to capital rather than to wages and reinvestment, consumption and pay growth are what give way.
When lenders top the profit table, money costs too much - and the cost is borne by everyone trying to build.
Widening the Road for Capital
The answer is not to begrudge banks their profits, but to give good capital more than one route to a project. The highest-return reform is deepening the corporate bond market - standardised issuance, genuine secondary-market liquidity, market-making obligations, and harmonised regulation. A bond market closer to 50 or 60 percent of GDP would let creditworthy borrowers price debt directly and compress the lending spread.
Alongside that, India needs far larger debt funds. Pension and insurance pools are still governed by mandates built for an older model of caution; updated, they could supply the patient, long-term capital the economy lacks. Continued fiscal consolidation matters too - government debt is around 82 percent of GDP, and roughly 22 percent of Union revenue goes to interest. Every notch of sovereign rating upgrade pulls borrowing costs lower for every company below it. And a calibrated opening of rupee debt to foreign investors, supported by deeper hedging markets, would add the depth and pricing competition India still lacks.
Also Read: Vedanta Group Announces Rs 80,000 Crore Investment in Northeast India
A Competitiveness Imperative
None of this weakens banks. A deeper capital market makes the whole financial system more resilient and hands banks better tools. What it changes is the price of money. Bringing the economy-wide cost of capital down by 200 to 400 basis points - achievable within a decade - would be transformative, releasing a virtuous loop in which lower costs lift government finances, improve the sovereign rating, and lower costs again.
In essence, India's ambition to become a $10 trillion economy is usually framed around demand and demographics. Both matter. But the profit table is pointing at the supply side of capital. When lenders lead, money costs too much. Bringing that cost down is how we put India's builders back at the top - and that is not a financial nicety. It is a national competitiveness imperative.