Indian Growth: Corporate earnings and Government revenue

In continuation from the article Indian Growth: Transportation Sector

Data for the transportation sector in India points towards a steady recovery in the past two years, with a pronounced recovery in one of the most important sectors of the country, the next sign of a recovery would come from an improvement in revenue growth for both the corporate sector as well as the Government of India.

For a brief overview on the Indian economy in this millennium, the section “India: The 21st century” in the previous article “Indian Growth: Transportation Sector” would be helpful.

Before turning to data for the government and corporate sector, it would be important to look at inflation in the country, this would help find the real growth in revenue for the above two sectors.




The above chart shows three measures of inflation, Wholesale Price Index, Consumer Price Index and GDP Deflator. (Consumer Price Index for the country was first calculated in 2011-12)

Two of the above three measures of inflation show a steady decline in inflation post 2012-13. The Wholesale Price Index on the other hand shows a marginal rise for the year 2013-14, but in the following year it shows a sharp fall.

The GDP deflator and Wholesale Price Inflation are at 1% and -0.85% in March of 2016, lower than what was seen prior to or immediately after the the recession.

Thus, while measuring economic activity (revenue growth in this case) it would be important to adjust for inflation to find the real change (or inflation adjusted change) in the indicator, since nominal changes (changes which have not been adjusted for inflation) can be misleading.


All the below measures have used the change in GDP Deflator to adjust growth rates for inflation.

Below is the data on growth rates of revenue for Corporate India and taxation revenue of the Government of India since the year 2003-04.

Corporate Earnings


The above data is of nominal and real revenue growth for the thirty firms listed on the BSE Sensex, the country’s benchmark index.

As can be seen, nominal revenue growth is high in the years prior to the recession, touching a pace of 25% in 2004-05 and 2006-07.

During the recession, nominal earnings growth fell but not to a great extent. The growth was around 14% of the year 2009-10.

While earnings growth did recover in the two years following the recession, a slowdown in domestic economic activity caused earnings growth to start a steady decline post 2011-12, with the year 2015-16 showing a 0.45% decline in nominal revenue for the thirty firms.

If revenue growth is adjusted for inflation (using the GDP deflator), the trend is similar. The only difference is that the fall real revenue growth (or inflation adjusted growth) seems to have bottomed out in 2014-15, real revenue growth fell at a marginally slower pace in 2015-16.


Government Taxation Revenue growth

Above is the nominal and real taxation revenue growth for the Government of India. The growth includes both direct as well as indirect taxation.

Nominal taxation revenue grew at a rapid pace until the recession, just like the corporate sector, growth in taxation revenue was between 20% and 25% the years prior to the recession.

During the recession, nominal taxation revenue grew at meager pace of 3.4% and 3.2% for the years 2008-09 and 2009-10 respectively.

Nominal revenue growth did recover in 2010-11, growing at a pace of 27%. Post 2010-11, growth declined, growing between 9% and 16% till 2014-15, mirroring a general economic downturn in the country.

The growth in nominal taxation revenue seems to have bottomed out in 2013-14, with growth in 2015-16 touching 17.2%. A large part of the 17% growth can be credited to the increase in taxes on petroleum products in the country, thus, the growth may not reflect the true economic conditions in the country.

If we adjust the taxation revenue growth for inflation, while the trend is more or less the same, it shows a sharper recovery in real revenue growth compared to nominal revenue growth.



The above data shows that the recovery in government revenue growth in both real as well as nominal terms is evident although it has been aided by the increase in taxation, primarily on petroleum products. The recovery in corporate revenue growth on the other hand is not clearly visible in nominal terms, but if the growth is measured in real terms, the recovery has begun.

Looking beyond the full year analysis for the government, for the first month of the new financial year (2016-17), April, indirect taxation revenue grew at a pace of 41% in nominal terms. This growth would include the increase in taxation rates on various products, if the growth is adjusted for the increases, then growth stands at 17%. This growth is a healthy sign which points towards a pronounced recovery in the economy of the country.

For the corporate sector, in the quarter ending 31st March 2016, nominal revenue has grown by 3.44% versus the same period in the previous year. This is a growth in nominal quarterly revenue for the first time since the quarter ending 31st December 2014. Thus, quarterly revenue growth points towards a recovery in Corporate India.


Hence, summing up data from both the pervious article as well as the current article, figures point towards a recovery in all data points, be it growth in vehicle sales or growth in revenue for firms. Thus, India’s economy has started a steady recovery and hopefully in the years to come, growth in all the above data points will accelerate to levels seen during the high growth years prior to the recession.


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