New Delhi, Nov. 4 -- Over the past decade, one area of visible improvement in the Indian economy has been the resolution of the 'twin balance sheet' problem, in which the corporate borrowers were weighed down by heavy debt and the banking industry was hamstrung by record volumes of unproductive loan assets. A new bankruptcy code, aggressive write-offs, and recapitalization of state-owned banks helped clean up the mess.

With commodity prices and inflation staying low for most of this period, interest rates were at subdued levels, and helped repair stressed corporate balance sheets.

A recent report from Dun and Bradstreet on zombie firms-or companies where operating profits are lower than interest expenses for three years in a row-found t...