Weak GDP growth in India hides growth in corporate profits

NEW DELHI -- India experienced a remarkable divergence between its macro and micro performance in FY21 (April 2020 to March 2021). GDP growth contracted sharply, yet the corporate profitability of listed Indian corporates improved. 

In a research note, ANZ Bank says expenditure compression was at the core of the profit improvement, and not all of that improvement came from declining commodity prices or interest rates. There was considerable restraint by corporates on 'discretionary' costs, ANZ says.       

"The pandemic has accelerated formalisation of the economy - (and) this has benefitted larger corporates more," it says.     

"This backdrop should continue to underpin foreign portfolio inflows into Indian equities as well as their superior valuations. The INR will also benefit."

www.research@anz.com  (ATI).