Report | June 2016 | Kanvic Grey Matter
The last five years have witnessed a dramatic decline in profitability at India Inc. despite the country’s rapid economic growth
Today India Inc. finds itself in difficult terrain. Revenue growth has stagnated and profits have hit at an all time low1. This is despite the fact that India’s headline growth rate today marks it out as the world’s fastest growing large economy.
In 2010 India’s GDP growth hit its highest point reaching over 10%. Although it fell back in the years that followed as fiscal stimulus gave way to a period of policy paralysis and low global growth, India continued to outpace most other economies. GDP growth rose steadily from a low of 5.6% in 2012 to 6.6%, 7.2% and 7.6% by 2015, surpassing even China.
However, the strength of the country’s economic growth has not been reflected in corporate performance. The Kanvic Performance Navigator shows that over the last five years top line growth at India Inc. as expressed through EBITDA2 fell from from 8.7% of GDP to 7.2%.
The fall in profitability has been much more dramatic. The net profit of India’s leading companies as a share of GDP more than halved from 2010 to 2015, falling from 4.1% to only 2%3.
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