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India’s corporate profit (listed plus unlisted) to gross domestic product ratio fell to 2.2% from 7.8% over 2008-20. For the Nifty-500 Universe, the ratio has declined to 2.2% from 5.1%, at a two-decade low, over the same period.
Notably, in 2022, the corporate profit to GDP ratio rebounded to a decade high of 4.3% and 4.5% for the Nifty-500 Universe and listed India Inc. respectively. The recovery was driven by the expansion in the economy, as the denominator i.e. GDP grew 19.5% YoY in FY22 after a contraction in 2021 (due to Covid-19 induced lockdowns), while corporate profit rose at a faster rate of 48% YoY (for the Nifty-500 Universe).
The growth in profit, however, was hardly broad-based and driven only by three sectors: banking, financial services and insurance, oil and gas, and metals. More than half of the incremental growth was steered by BFSI, underpinned by a modest revival in credit growth and improvement in asset quality trends.
In this report, we analyse ‘corporate earnings as a percentage of GDP’ in greater detail.
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