India Inc's profit to GDP ratio dips in Q2

Ratio for manufacturing firms at 9-quarter low

- KRISHNA KANT

The corporate profit to gross domestic product (GDP) ratio declined sharply in the previous two quarters, reversing the steep rise seen in the second half of financial year 2020-21 (FY21) and FY22.

The combined net profit of the 3,361 listed companies in Business Standard's sample was equivalent to 3.48 per cent of India's GDP at current prices in the September quarter (Q2FY23), down from 3.57 per cent in Q1, and 4.39 per cent in Q2FY22, which was a decadal high. The Q2 figure was, however, higher than the pre-Covid average of 2.3 per cent.

The decline in the ratio was led by manufacturing companies, which saw their profit as a percentage of the GDP fall to a nine-quarter low. In contrast, firms in the services sector - especially banks, financial services, and insurance (BFSI) companies reported record high earnings in Q2 and increased their profit share.

The combined net profit of the firms in the sample declined 7.8 per cent year-on-year (YoY) in Q2 to ₹2.27 trillion from around ₹2.47 trillion a year ago. Quarterly corporate earnings were 18.2 per cent lower than the record high of ₹2.78 trillion seen in Q4FY22.