Corporate Income of India have expanded at nearly three times the rate of the economy as a whole over the past six years, indicating structural shifts in profitability and the increasing contribution of listed companies to India’s economic output, according to a report by Motilal Oswal Financial Services.
The latest report of brokerage India Strategy showed that the profit of Rs A Nifty-500 company recorded a compound annual growth rate (CAGR) of 28.7% during FY20-26, significantly higher than the nominal GDP CAGR of 9.5% over the same period.
The strong earnings trajectory pushed the corporate profit-to-GDP ratio of the Nifty-500 to a record high of 5.2% in FY26, the highest ever recorded for the index and nearly 2.6 times higher than in FY20.
Profits increased
According to the report, corporate profits of the Nifty-500 universe rose to Rs 18.1 lakh crore in FY26 from Rs 3.97 lakh crore in FY20, while nominal GDP increased from Rs 201 trillion to Rs 346 trillion in the same period.
In FY26 alone, Nifty-500 profits grew by 15.6% year-on-year, well ahead of nominal GDP growth of 8.9%. The report noted that economic growth slowed due to weaker manufacturing activity and lower external demand, although growth in services, improved agricultural output and an acceleration in investment spending provided support.
The report said Corporate India’s earnings came to the fore despite geopolitical uncertainties and their impact on markets and the economy.
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Five sectors are lit
Several sectors are responsible for the bulk of the increase in profitability.
Banking, financial services and insurance (BFSI), oil and gas, automobiles, metals and technology together accounted for 76% of total corporate income to GDP.
BFSI has emerged as the single largest contributor, contributing 1.94% of GDP. Oil and gas accounted for 0.68%, followed by autos at 0.52%, metals at 0.42% and technology at 0.40%.
Among the sectors, the largest contribution to the growth of the coefficient in the annual calculation was made by the automotive industry, which increased by 0.19 percentage points. Oil and gas added another 0.15 percentage point, while metals added 0.07 percentage point.
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A strong comeback by BP
The report also notes the sharp revival of public sector enterprises.
On an ownership basis, private companies in the Nifty-500 recorded a profit-to-GDP ratio of 3.2%, while PSUs improved to 1.8%, driven by broad-based earnings recovery in PSU banks, insurance companies and oil and gas companies.
Power supplies witnessed one of the strongest recoveries since FY20, with their profit-to-GDP ratio more than tripling from 0.5% in 2020.
Large-caps continued to dominate the return pool, contributing 3.94% to the total ratio, while mid-caps hit a 15-year high of 0.87%. The share of companies with small capitalization was 0.42%.
The earnings dynamics are expected to continue
Motilal Oswal expects the trend of outpacing economic growth in corporate earnings to continue in FY27.
The brokerage is forecasting Nifty earnings growth of 15-16% in FY27 compared to nominal GDP growth of 11-11.5%.
However, the report cautioned that geopolitical tensions and higher commodity prices linked to the West Asian crisis remain key risks and could affect India’s macroeconomic parameters and monetary policy outlook.
If earnings continue to outpace the economy, Corporate India’s share of national output could increase further, reinforcing a trend that has gathered pace since the pandemic.
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