Although capital expenditure by India's corporate sector has increased dramatically this year, India Inc's balance sheets appear in fine fettle and that augurs well for mid-term earnings growth, according to an assessment by JM Morgan Stanley. The absolute levels of capital expenditure for the top 89 companies in the country is forecast to cross a trillion rupees in 2007-08, and capex-to-GDP will touch its highest level this year. But while debt to finance this capex has been growing in absolute terms (the debt-to-GDP is lower than the high point of the 1990s, but has increased to a three year high), Morgan Stanley projects a further decline in the debt-equity ratio thanks to a rapid growth in earnings and cash flow.
