India's slowing growth and rising fiscal deficit has been a matter of great worry. It has been a big headache for the Finance Minister. Rating agencies have been threatening of downgrading India's rating to junk status if the financial condition deteriorated further. If this happens, attracting foreign capital would become even more difficult and expensive. Keeping these risks in mind, the FM has launched an austerity drive. But this is taking a toll on highly indebted corporates. Tight liquidity has resulted in a torrent of corporate rating downgrades. During the first half of FY13, rating agency CRISIL downgraded 484 companies. This went up to 530 downgrades during the October-February period. This means over 1,000 downgrades this fiscal. It must be noted that there were just 492 downgrades during the whole of FY12. Banks have been facing the risk of rising bad loans. As such, they have shut the doors on small and medium enterprises. This has been the worst affected segment. It will take a while before these companies escape from the debt trap.