“There is no law of nature that the most powerful will eventually remain at the top. Anyone can fall and most eventually do.” That was business consultant and author Jim Collins, in his 2009 book How The Mighty Fall. Seven years on, little has happened to make those words any less true. India Inc. has seen a dismal fall in the past few years; it reported its worst earnings in the past 20 years in 2015-16 with net sales growth plunging from a healthy 9.5% in FY13 to -3.7 % in the first three quarters of FY16. That performance is reflected in the 2016 Fortune India 500, which has seen its first fall (of 1.9% in aggregate revenue) since 2010.

This is not how it was supposed to be. From FY03 to FY08 (and later from 2012 to 2014), India Inc. was flying high. It was “enjoying a dream run, with industry and services growing at close to 10% every year during this period,” says Sunil Sinha, principal economist and director, public finance, India Ratings. The debt-led, cyclical boom coincided with an exceptional rise in global trade—exports grew by 17.8% and imports by 20.1% every year—which saw India’s economy growing at 8.8% a year.

Exhilarated by these years of growth, corporate India went on a shopping spree. “Promoters of many Indian firms sought to leapfrog into the big league, sometimes in diverse businesses, overlooking the downside risks of high costs of external commercial borrowings,” says Sinha. The shopping list was long and eclectic. The highlights: Tata Steel bought Corus, a British company four times its size, in an all-cash deal worth $13 billion (Rs 82,000 crore) in 2006; Airtel acquired Zain Africa for $10.7 billion in 2010; and Hindalco bought Novelis for $5.7 billion in 2007. And then consider this: Between FY07 and FY16, Bharti Airtel’s interest outgo rose 38 times, while debt rose over 18 times. For Hindalco, these numbers were 12 times and 8 times. Clearly, those were not great buys.

India Inc. would have done well to remember the old adage that if it seems too good to be true, it probably is. Because in 2007-08, the brakes were slammed on this runaway growth. The global financial crisis led by the collapse of Lehman Brothers saw the credit market come to a complete halt; foreign portfolio investments fled to the safety of the dollar. The net FDI outflows from equities exceeded $31 billion in six months between September 2008 and February 2009.

Corporate India found itself saddled with high-cost debt thanks to suddenly high interest rates, a depreciating currency, and a collapsing export market. Infrastructure majors such as Lanco Infratech saw debt spiral at a compounded annual growth rate of 76% FY07 to FY12; the Adani Group’s debt increased by 74% in the same period.

Between 2007-08 and 2010-11, India Inc. had no option but to tighten its belt, and wait for better times. The tide turned in FY10, helped by a substantial fiscal stimulus from the government. And that revival was reflected in the first two editions of the Fortune India 500. Between 2010 and 2011, there had been a 21.4% rise in the top line of the 500; “a typical Fortune India 500 company reported a 71.1% growth in net worth”, we wrote then.

Except, as we warned, the numbers for the first two quarters of 2011-12 were not encouraging despite all the optimism in the air, to say nothing of the high double-digit growth of the Fortune India 500 companies. The widening gap between assets and liabilities foretold a slowdown in expansion. Investors weren’t as bullish on equities, and dividend income rose at a slower pace than in 2010.

By 2012, it was clear that there was nothing to cheer about. In the Fortune India 500 for 2012, it was clear that a higher rate of inflation accounted for higher revenues, and was also responsible for lower profits. “Weak consumer sentiment and high interest rates have caused increases in working capital,” we wrote.

Back then, the results of the 2014 general elections were looked forward to as the cure to India’s economic malaise. The Bharatiya Janata Party swept to power, promising to change a broken system. But has the situation markedly improved with the coming of a new political party to power? A recent report from Motilal Oswal suggests that things are worse than we think; the report compares today with the days immediately following the dotcom crash in fiscal 2000.

In December 2014, we had said that corporate India, like a large part of the country, was being cautiously optimistic. The high-decibel ‘Make in India’ campaign and the promise of the long-deferred Goods and Services Tax (GST) added to the hope in the air, and the country’s 500 largest companies saw a 9.5% rise in total revenue in 2014. In a year, the optimism turned, and last year saw an average growth of just 2.7% in revenue across the 500 companies.

Outside of the 500, there was still some optimism, with India moving up 12 places to 130 on the World Bank’s Ease of Doing Business index in 2015. As important, the government announced that GDP grew at 7.4%, beating China again. Except, that data came under a cloud almost immediately, with critics lambasting the new method of calculation (more on that later). In fact, Bank of America-Merrill Lynch reportedly claimed that GDP growth would have been 5.2% for second quarter ended September 2016, had the conventional method been used and would have been at 5.6% for FY17.

We find ourselves in a similar situation today, with all the signs pointing to a slowdown—except GDP, which seems to be moving along at a fast clip. For the first time, there has been a “de-growth” of 1.93% in total revenue of the Fortune India 500. Looked at in light of the new method of calculating GDP, which takes a much broader sample size of industries, this disconnect can be explained as the rise of the smaller companies.

What does that mean in the context of the Fortune India 500? One reading is that for the first time, smaller companies are driving GDP. The corollary, of course, is that larger companies are losing relevance. Except, as we see, that’s not really the case. Yes, smaller companies have been growing at a faster clip, but that’s also on a far smaller base. The bigger companies are still driving growth.

(To explain, the new calculation does not any longer take into account the performance of only the bigger companies; from 2010-11, GDP has been calculated based on the performance of an expanded base of companies; instead of an RBI sample size of a shade under 3,000, the new sample is 5 lakh, which is all companies under the ambit of the Ministry of Corporate Affairs. Other parameters have also been changed, including the base year for calculation and using the globally-accepted norm of gross value added (GVA)—which is derived by adding staff costs to depreciation and profit after tax— rather than just sales. As a result, if GDP growth was 4.8% (from Q1 of FY13 to Q2 of FY15) under the old calculation, it jumped to 6.3% in the new series.)

The reason bigger companies are seen as slower than the others in the GDP sample is that large companies are more capital intensive. Not only do they spend more on fixed infrastructure, their capital usage is also disproportionately higher. This makes large companies relatively less agile and unable to adapt to sharp changes in economic environment.

So, how has the 500 as a whole performed this year? As we have seen, total revenue fell for the first time in six years. One of the primary reasons for that is the fall in oil prices. The oil and gas sector, with 14 companies on the list, accounts for 19.2% of the total revenue of the 500 and 17.1% of total profit. And these 14 companies saw a 24.2% dip in revenue. The fall in profit, however, can be attributed to the banking sector; the 53 banks on the list saw a 57.2% fall in aggregate profit compared with the last year. The reason for the huge fall was higher provisioning for bad assets. That decline led to a sale of strategic assets from overleveraged companies.

The story of overleveraged big companies is not a happy one, with companies forced to sell assets they would otherwise have never given up. The latest example in the sell-off story was the $13 billion deal to sell 98% of Essar Oil to Russia’s Rosneft. Earlier, Anil Ambani’s ADAG sold 51% of the tower assets of Reliance Communications to Brookfield for Rs 11,000 crore; the Jaiprakash Group also divested its 17.2 million tonne cement plant to the Aditya Birla Group’s Ultratech Cement for around Rs 17,000 crore. Other companies chose to go the corporate debt restructuring route; in one year, the number of approved CDR cases ballooned from 184 cases worth Rs 86,536 crore in FY09 to 530 cases worth Rs 4 lakh crore as of September 2016.

Coming back to the list, this year has seen a shift in the contribution of the manufacturing and services sectors. This year, 289 manufacturing companies account for 58.3% of total revenue, and 43.6% of profit. The same contribution last year was 64% and 53%. Correspondingly, the contribution of the services sector zoomed to 37.6% of revenue and 54.6% of profits, up from 30% and 45% last year. The overall lacklustre performance has led to a 3.8% fall in dividend this year.

This year, larger companies struggled more than the smaller ones on the list. The top 176 companies on the 500 list, which have revenues ranging above Rs 7,500 crore registered an average annual 1.2% fall in revenue, but the average profit declined by an average annual 28.5%. The 164 companies with revenues ranging between Rs 3,000 crore and Rs 7,500 crore, fared way better with an annual average revenue growth of 9.5% while their average annual profits grew 45.5%. The 160 companies at the bottom of the revenue cluster (revenues upto Rs 3,000 crore) saw average annual revenue and profits rise by 3.1% and 1.9% each.

The bad news just doesn’t end. Things are unlikely to look up, especially in the near term. In a drastic step, touted as his move to stem the flow of black money in the system, Prime Minister Narendra Modi overnight outlawed the use of Rs 500 and Rs 1,000 notes. Together, these notes accounted for over 86% of the value of cash in the system, and withdrawing them sent shock-waves through the country. It also led to two starkly divergent schools of thought. One, which is the government line, that the economy will be relatively unaffected by this move; in fact, in the long run, it will result in a transparent economy. The other school says that this move could set the economy back several years severely damaging the cash-only informal sector of the economy.

A now widely publicised report from Mumbai-based brokerage, Ambit Capital, estimates that demonetisation will cause the GDP to decelerate from 6.4% in the first half this fiscal to 0.5% in the second half. In a mid-November report from HSBC, Pranjal Bhandari, its chief India economist, estimates that GDP can fall by 0.7 to 1 percentage point over the next year. And, in a recent report, Nikhil Gupta, economist at Mumbai-based brokerage Motilal Oswal, sees a similar fall. Assuming that 10% of the currency in circulation (Rs 1.8 lakh crore) does not return to the system, nominal GDP growth could be 10% year on year in FY17, as against his pre-demonetisation expectation (and market consensus) of 11.5%. “Since the impact on inflation is likely to come with a lag—possibly in FY18—real GDP growth could fall by the same extent to 6.2% in FY17, as against our pre-demonetisation expectation of 7.7%,” says Gupta.

The implementation of GST in 2017 is widely touted as being the big boost to the economy. Except, once more, there’s likely to be a gap between intent and performance. In the course of a call organised by IIFL Holdings, Satya Poddar, tax partner at EY, says the new structure of GST, with seven to eight different tax rates and many exemptions, will neither broaden the tax base nor simplify the rate structure. The only benefit would be a common market of relatively tax-free movement of goods and full credit for any duties levied.

Again, the belief that the cascading effect of input taxes will disappear under GST, too will not fructify. Hence, the expected 2% improvement in GDP, will at best be 0.5%.

What with domestic financial difficulties and an uncertain global situation (with the new President of the U.S. likely to take a hard line on outsourcing and imports), the country’s largest companies are going to find the going increasingly tough.