Corporate Profit Ratio to India’s GDP – Cycle Growth Analysis: Motilal Oswal

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India’s corporate profit (listed plus unlisted) to gross domestic product ratio fell to 2.2% from 7.8% in 2008-2020. For Nifty-500 Universe, the ratio fell to 2.2% from 5.1% at the lowest level of two decades for the same period.

It should be noted that in 2022, the corporate-to-GDP ratio is recovering to a decade-high of 4.3% and 4.5% for Nifty-500 Universe and Leaf India Inc. respectively. The recovery is due to the expansion of the economy, as the denominator, ie. GDP grew by 19.5% year on year in 2022 after a contraction in 2021 (due to a blockade caused by Covid-19), while corporate profits grew at a faster rate of 48% on an annual basis (for the universe Nifty-500).

However, profit growth has hardly been large-scale, driven by only three sectors: banking, financial services and insurance, oil and gas and metals. More than half of the growing growth is driven by the BFSI, supported by a moderate revival of credit growth and improved asset quality trends.

In this report, we analyze “corporate profits as a percentage of GDP” in more detail.

Click on the attachment to read the full report:

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