India's Corporate Comeback: How Fiscal Policies Fueled Record Sales Growth

Net profits rose significantly to Rs 7.1 trillion in 2024-25 from Rs 2.5 trillion in 2020-21. Consequently, the net profit margin improved to 10.3 per cent during 2024-25 from 7.2 per cent in 2020-21.

Corporates continued to deleverage their balance sheet supported by capitalisation of higher profit, with debt-to-equity ratios improving across firm sizes. The interest coverage ratio for manufacturing firms improved significantly, reaching 7.7, on an average during the post-COVID period, reflecting robust debt-servicing capacity, according to the RBI's October Bulletin.

Large firms drove profitability, while medium and small firms demonstrated greater improvement in debt servicing capacity than the large firms.

India's private corporate sector has demonstrated significant resilience and adaptability amid economic disruptions led by the COVID-19 pandemic.

While the weak domestic economic activity underpinned by sluggish private consumption during 2019-20 and the pandemic overblown the situation further causing a significant contraction in sales and profitability.

The corporate sector rebounded strongly thereafter, supported by fiscal and monetary policies, pent up demand, and effective cost management.

"Operating profit margins remained resilient, with large firms consistently outperforming medium and small enterprises. Despite challenges, cost optimisation strategies helped businesses sustain profitability. The manufacturing sector maintained stable profit margins, while non-IT services, after initial volatility, rebounded strongly. IT sector growth remained steady throughout," the Bulletin observed.

Medium and small firms enhanced their debt servicing capacity, contributing to overall financial stability.

"With a robust financial foundation and adaptive strategies, the sector remains well-placed to capitalise on future opportunities and contribute to sustained economic expansion. Looking ahead, sustaining corporate growth will largely depend on a combination of factors such as macroeconomic conditions, domestic demand, supportive policy measures, and global market dynamics," the Bulletin highlighted.

Additionally, strengthening supply chains, improving cost efficiencies, and fostering technological innovations will play a key role in maintaining competitiveness and shaping overall corporate performance, it added.

- IANS