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Corporate profits-to-GDP ratio at 15 year low in 2018: Report

Mumbai, Jan 25 (IANS) Weak corporate earnings pushed the corporate profits-to-GDP ratio among the Nifty 500 companies to a 15 year low of 2.8 per cent, a Motilal Oswal report said on Friday.

The ratio of corporate profits-to-GDP among all the listed and unlisted companies in India also declined to a 15 year low of 3 per cent.

“The continued soft patch in earnings over the last decade has resulted in steady deterioration in the corporate profit-to-GDP ratio. Corporate profit as a percentage of GDP has dropped to 2.8 per cent — a 15 year low — from the peak of 5.5 per cent in 2008,” the report said.

It noted that the ratio has consistently declined since 2010, barring 2017 which came on the back of a rebound in metals and oil and gas sectors and the loss reduction in public sector banks.

The report however, said that the ratio of corporate profit is likely to increase in 2019.

“We now believe that India’s earnings growth has bottomed out and that the corporate profit to GDP ratio should expand hereon.

“Our confidence stems from the bottoming out of the asset quality cycle in PSU and Private Corporate Banks and some initial signs of green-shoots in private corporate capex. Consumption, too, remains robust,” it added.




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