In 2024, the corporate profit to GDP ratio for the Nifty-500 Universe and listed India Inc. surged to 4.8% and 5.2%, respectively, reaching a 15-year high. This significant year-on-year improvement was primarily driven by the Banking, Financial Services, and Insurance (BFSI), Oil & Gas, and Automobile sectors, which together accounted for 95% of the total increase, according to a Motilal Oswal Financial Services report. In contrast, the Metals, Technology, and Chemicals sectors had a negative impact on the overall performance.
Sector leaders
The 0.8% year-on-year increase in the Nifty-500 profit-to-GDP ratio was fuelled by a 0.3% rise from the BFSI sector, another 0.3% from Oil & Gas, and a 0.2% increase from the automobile sector. Corporate profit for the Nifty-500 universe grew at an accelerated pace of 30% year-on-year in FY24, following a moderation to 9.3% in FY23 and a 52% surge in FY22.
Meanwhile, India’s Nominal GDP grew by 9.6% year-on-year in FY24, which was slower than the corporate profit growth, and it followed a 14.2% year-on-year GDP growth in FY23, down from 18.9% in FY22.
Historical trend
Historically, India’s corporate profit (including both listed and unlisted companies) to GDP ratio experienced a substantial decline, falling from 7.9% in 2008 to 1.9% in 2020. For the Nifty-500 Universe, this ratio also saw a sharp contraction, reaching a two-decade low of 2.1% in 2020 from 5.2% in 2008.
Public Sector Undertakings (PSUs) witnessed a similar trend, with their profit to GDP ratio decreasing from 2.1% in 2008 to 0.5% in 2020. This decline was largely due to significant value migration from public to private sectors, notably in Banking, Telecom, and Airlines. However, by 2024, PSUs had made a notable recovery, with their profit to GDP ratio rising to 1.8%.
