India Inc thrived, witnessed robust growth in 10 yrs of Manmohan Singh govt

The last five-years however has been the best for corporate India in terms of net profit growth thanks to margins expansion and gains from a cut in corporate tax in September 2019

Corporate India witnessed robust revenue and profit growth during the two-term tenure of the Manmohan Singh-led government, but the momentum slowed sharply during the first term of the Narendra Modi administration before witnessing a recovery in the post-Covid period. 

While the last five years have been a standout period for net profit growth, thanks to margin expansion and a corporation tax cut in September 2019, revenue growth remains muted compared to the Singh years when it was in double-digits.  

Listed companies across sectors in Business Standard’s sample recorded a compound annual growth rate (CAGR) of 19.3 per cent in net sales (gross interest income for lenders) during FY04-FY14, which decelerated to 7.3 per cent during FY14-FY24. Total net sales increased from Rs 10 trillion in FY04 to Rs 58.8 trillion in FY14, and further to Rs 119.4 trillion in FY24.  

Net profit growth, adjusted for exceptional gains and losses, also slowed during the past decade. The CAGR for net profits dropped to 11.6 per cent in FY14-FY24 from 14.1 per cent during FY04-FY14. The deceleration was even more pronounced in operating profit growth, which declined to 8.8 per cent CAGR in FY14-FY24 compared to 17.7 per cent in the preceding decade. 

 

The FY19-FY24 period, however, emerged as a bright spot, with net earnings posting a 22.1 per cent CAGR — the best five-year performance in two decades. This growth, however, came after a modest 2 per cent CAGR in corporate earnings during FY14-FY19. Comparatively, corporate earnings had grown at 19.3 per cent CAGR during Singh’s first term, but slowed to 9.1 per cent in 

his second term, marked by the lingering impact of the Global Financial Crisis (GFC) of 2007-2008 and the Eurozone 

crisis of 2012.  

Revenue growth, too, decelerated during Modi’s first term. The combined revenues of listed companies in the sample grew at a 5.9 per cent CAGR during FY14-FY19, followed by a mild recovery to 8.8 per cent CAGR during FY19-FY24. The slowdown was more pronounced in manufacturing and non-financial service sectors. Excluding banking, financial services and insurance (BFSI) firms, and government-owned oil and gas companies (OMCs), net sales growth plunged from a 20.7 per cent CAGR during FY04-FY14 to 7.7 per cent CAGR in FY14-FY24.  

 

Between FY04 and FY09, non-BFSI and non-OMC companies posted a 27.9 per cent CAGR in net sales — the best performance in two decades. By contrast, FY14-FY19 marked the weakest period, with a 6.8 per cent CAGR.  Net sales growth rebounded slightly to 8.5 per cent CAGR during FY19-FY24; the figure was 14 per cent during FY09-FY14. 

On the bottom line, the adjusted net profit CAGR for non-BFSI and non-OMC companies dropped from 15.7 per cent during the Manmohan Singh years to 10 per cent in FY14-FY24. The gap was even starker in operating profit (Ebitda) growth, which declined to 8.8 per cent CAGR in FY14-FY24 from 18.2 per cent in the previous decade. Profit growth over the past 10 years was buoyed by the 2019 corporation tax cuts and lower interest rates.  

Net profit growth varied widely across five-year blocks. During FY04-FY09, net profits posted a robust 24.9 per cent CAGR. This growth slowed to 7.2 per cent CAGR in FY09-FY14, before recovering to 7.7 per cent CAGR in FY14-FY19 and improving further to 12.4 per cent CAGR during FY19-FY24.  

The BFSI and OMC sectors outshone others over the past decade. BFSI companies achieved a 14.3 per cent CAGR in net profits during FY14-FY24, only slightly below the 15.8 per cent CAGR posted during FY04-FY14. OMCs outperformed, with net profit growth accelerating to 11.8 per cent CAGR in FY14-FY24 compared to 6.6 per cent in FY04-FY14.