The ratio, which declined sharply to 0.66 in the first half of 2012-13, has been largely stable in the second half, the ratings agency said. The default rate has also been largely stable, it said. Corporate India's credit quality trends will improve marginally in 2013-14 on the back of easing demand pressures, lower commodity prices and declining interest rates.

"Rating downgrades may, nevertheless, continue to outnumber upgrades over the medium term given that companies' stretched working capital cycles are unlikely to improve any time soon," Crisil said. Downgrades have continued to outnumber upgrades in the second half of 2012-13-with 616 downgrades as against 379 upgrades. The downgrades were driven largely by slowdown in demand and tight liquidity, resulting from stretched working capital cycles.

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