India Inc's profit contribution to GDP at two-decade low, shows data

India Inc’s profit contribution to the country’s gross domestic product (GDP) fell to 1.8 per cent in 2019-20 (FY20) — the lowest reading since at least 1999-2000. At its peak in FY08, the contribution stood at 7.8 per cent. Since then, it has been on a downward slope. 

Corporate earnings growth has largely remained stagnant in the last five years. The earnings per share (EPS) for Nifty companies was Rs 416 in FY17. The reading could be around Rs 450 for the current financial year. India’s corporate profit-to-GDP ratio is among the lowest in the world. The global average is about 4.7 per cent. India’s long-term average is about 4.4 per cent.

One could expect some mean revision if the consensus earnings growth estimates for the next two financial years materialise. The Street is expecting Nifty earnings to grow by more than 60 per cent by FY23. Companies in the financial and industrial sectors will have to see earnings revival if the corporate profit to GDP ratio has to improve, say analysts.