NEW DELHI: India Inc., is losing steam at a fast pace. The cumulative revenue growth of 642 companies in the Indian corporate sector, slowed to an 11-quarter low at 5.7 per cent in the April-June 2019 quarter on the back of weak consumer demand and sluggish Government spending.
A study by ICRA ratings showed a sharp decelaration in revenue growth for these firms which are from varied sectors from a high of 19.5 per cent in the second quarter of the previous financial year.
“The fall in revenue growth is extremely sharp but not much of a surprise given the fact that manufacturing as a whole grew by just 0.6 per cent in the same period,” said Prof. N.R Bhanumurthy of the National Institute of Public Finance and Policy.
India’s GDP grew by just 5 per cent in that quarter, underlying the slowdown in the India economy.
Economists feel that despite the announcement of corrective measures by the Government, overall growth for the year would remain subdued.
Shamsher Dewan, Vice President, ICRA said, “The weakness in consumer-linked sectors has been visible in multiple sectors. Automobiles sales reported sharp double-digit decline, which has continued into the current quarter as well, while FMCG companies reported a sequential slowdown in volume growth in both rural and urban markets.”
ICRA said the financial results of its sample companies were reflected in the sequential contraction of 7.7 per cent in revenues of consumer-oriented sectors. Part of the slowdown was also because of Government spending coming down in the run-up to the general elections in May 2019.
Said Arindam Guha, partner with consulting firm Deloitte “the corporate slowdown is not a one size fits all story. As we see it the slowdown is sector-specific. If you look at the IT and telecom hardware sectors, they are doing well. With the recent relaxation of single-brand retail sourcing norms, we could potentially see further upside.”
While the study showed consumer-linked sectors like automobiles and FMCG reported weaker revenues. The IT sector reported strong revenue growth of 10 per cent in first quarter, according to the ICRA analysis which attributed this to rupee depreciation and traction in digital offerings across verticals.