Economic Survey: Can profits continue to be India Inc's primary source of funds?

Over April-November 2025, within the overall flow of financial resources, there was a significant increase in the flow from non-bank sources, which rose by 29.3% year-on-year, against 18.3% growth in non-food bank credit. “A concurrent increase in the flow of financial resources to the commercial sector, bolstered by greater non-bank intermediation, has accompanied the slowdown in bank credit growth in early FY26. This trend indicates that non-bank sources have effectively offset the decline in bank credit," the survey noted.

Within non-bank funding, growth from foreign sources outpaced domestic growth. As of 31 December 2025, foreign sources surged by 38% y-o-y, doubling the 19.1% growth from domestic sources. This foreign influx was primarily driven by a dramatic rise in external commercial borrowings (ECBs)—which climbed from ₹5,000 crore to ₹27,700 crore—and a 67% jump in foreign direct investment (FDI). Meanwhile, domestic growth was fueled by corporate bond issuances, which saw a staggering 263.3% increase on a yearly basis, the survey added.

Profit power

A separate Mint analysis of CMIE data revealed that net profits—or internal accruals—remain the primary funding source for Indian corporates. In the September quarter, non-financial companies recorded a massive ₹3 trillion in net profits, accounting for nearly 40% of all funds raised. This 54.5% year-on-year surge marked the strongest profit growth in four years.

Beyond these internal accruals, the broader funding landscape was supported by increased bank credit to the industrial and services sectors, fresh equity and debt issuances, net FDI, net ECBs, and a rise in outstanding commercial paper (CP).

Companies prioritized internal cash generation as their primary financing lever, ensuring their balance sheets remained robust and unburdened, experts said.

But is this internal-financing lever staring to weaken? Early results for the December quarter revealed a disrupted profit narrative as Q3 expenses surged. A spike in labour and input costs squeezed margins just as revenue recovery was gaining traction.

Analysts suggested that while the immediate impact of the new labour codes may deliver a one-time accounting hit, rising raw material costs present a more persistent structural risk. In this environment, the reliability of internal accruals as a primary funding source faces a stern test.