This confidence has been further dented by Trump’s unpredictable moves. Eventually, all these factors will likely show up in data with a lag. That’s also why many analysts are pencilling in further earnings downgrades in the coming quarters.
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While the government chides private businesses for not throwing money into capex to fuel growth, even as it continues to spend on infrastructure development, there is little likelihood all will bite the bullet unless they see growth visibly improving. And growth hasn’t been spectacular in the recent past, as some might want us to believe.
Not a roaring economy
India’s Gross Value Added grew by 9.4% in FY22, 7.2% in FY23 and 8.6% in FY24. That’s heady growth by any stretch of imagination, right? Wrong. This seemingly strong growth comes on the back of a big contraction following the Covid shock.
If you were to look at the 5-year CAGR for GVA since FY19, the number is just 4.87%. That isn’t a great growth trajectory by any stretch of imagination. Much of the growth in the past three fiscals has been driven by catching up to where we were.
No wonder then that private capex isn’t picking up. India Inc will add capacity only once it is running out of capacity, but in many sectors, we aren’t there yet. What’s more, growth is now faltering. GVA for the 9 months of FY25 is up barely over 5%. And that’s a worry.
| INDIA GVA | |||
| FY | GVA | % Chg | |
| 2011-12 | 8106947 | ||
| 2012-13 | 8546277 | 5.4 | |
| 2013-14 | 9063647 | 6.1 | |
| 2014-15 | 9712132 | 7.2 | |
| 2015-16 | 10491868 | 8.0 | |
| 2016-17 | 11328285 | 8.0 | |
| 2017-18 | 12034171 | 6.2 | |
| 2018-19 | 12733800 | 5.8 | |
| 2019-20 | 13236100 | 3.9 | |
| 2020-21 | 12687344 | -4.1 | |
| 2021-22 | 13876840 | 9.4 | |
| 2022-23 | 14878028 | 7.2 | |
| 2023-24 | 16151477 | 8.6 | |
| 2024-25 (9M) | 12600551 | 5.1 | |
Source: RBI
Add to this, some big technology changes like AI are disrupting the technology landscape, threatening to stem the employment creation of the past decade by India’s torch-bearing sector, I.T. services. Trump’s MAGA mission is also set to disrupt the world order and world trade.
The one bright spot can be real estate and housing, but here too the mass, affordable segment isn’t showing any signs of perking up. And any hopes of rate cuts fuelling demand has also been put into doubt by noted banker, Uday Kotak, who has suggested banks are lending at rates below their cost of funds.
Elusive double-digit sales growth
Not just the broader economy, even India Inc hasn’t been faring too well. RBI’s database on listed non-financial companies reveals that the 5-year CAGR for sales of these companies collectively grew 9.6% from FY19 to FY24.
That’s under double-digits, and roughly 2x the GVA growth. Operating Profits grew only a tad faster at 11.3%. And this is after accounting for an increase in the data universe from 3,151 companies to 3,281 companies. With FY25 seeing a weak first half and FY26 getting off to an uncertain start, it isn’t likely that double-digit growth for India Inc will materialise anytime soon.
Source: RBI
With growth and economic indicators presenting a worrying picture, globally and at home, investors in equities need to adopt a cautious approach. Picking companies that will perform despite the challenging environment is the best way to go.
Happy investing!