India’s corporate sector is on track for a solid revenue boost in the January-March quarter of 2025, according to a new report by ratings agency ICRA Ltd. The report forecasts a 7-8% revenue growth for India Inc. in this period, marking a notable improvement over the previous quarter (October-December 2024). This positive outlook is driven by rising urban demand, strong rural spending, and increased government expenditure.
Key Drivers of Growth
ICRA’s report, released on February 24, 2025, highlights several factors behind this expected growth. One major contributor is the revival of urban demand, which had been sluggish in recent months. The boost comes after the Union Budget 2025 introduced a higher income tax exemption limit of Rs 12 lakh per year, giving people more disposable income. Additionally, the Reserve Bank of India (RBI) cut its benchmark lending rate by 25 basis points on February 7, making borrowing cheaper and encouraging spending. Lower food inflation is also expected to drive demand for non-essential items like electronics and fashion.
Rural demand has remained resilient and is expected to stay strong in early 2025. According to Kinjal Shah, Senior Vice President and Co-Group Head for Corporate Ratings at ICRA, good harvests from both the kharif (summer) and rabi (winter) crop seasons are supporting rural incomes and spending.
Profit Margins and Financial Stability
India Inc.’s operating profit margins, which improved in the December quarter, are projected to remain stable at 18.2-18.4% in Q4 FY2025. This stability is attributed to rising consumer confidence and sustained demand. Lower interest costs, following the RBI’s rate cut, will also help businesses manage their finances better. The interest coverage ratio—a key indicator of a company’s ability to repay debt—is expected to rise slightly to 4.6-4.7 times, up from 4.5 times in the previous quarter.
Global Challenges and Investment Caution
Despite the optimistic outlook, ICRA warns that global economic uncertainties could pose risks. Issues such as trade tariffs, geopolitical tensions, and a weaker global economy might impact revenue growth, especially for export-driven sectors like textiles, auto components, and IT services, which have already been facing weaker international demand.
Private investment growth is also expected to remain slow, as businesses remain cautious due to uncertainties in global trade. Concerns about potential U.S. policy shifts under President Donald Trump, a weaker export outlook, and fluctuating foreign exchange rates have made companies hesitant to invest aggressively. However, sectors such as electronics, semiconductors, and electric vehicles are likely to attract continued investment, supported by government incentives like production-linked schemes.
Q3 FY2025 Performance: A Recap
ICRA’s analysis of 602 listed companies (excluding financial firms) in the October-December 2024 quarter showed a year-on-year revenue growth of 6.8%. This was largely driven by consumer-focused industries such as FMCG, retail, hospitality, airlines, and consumer durables. The festive season in late 2024 also played a role in boosting sales. However, quarter-on-quarter growth was modest at 3.5%, as urban demand was still in recovery mode.
Some sectors, particularly commodity-based industries like iron and steel, faced challenges due to lower global prices and competition from cheap imports, especially from China. Export-oriented businesses, including agrochemicals, diamonds, and auto parts, also struggled due to geopolitical tensions.
Why This Matters
The anticipated growth in Q4 FY2025 is significant because urban demand has been a weak spot for many major companies, including those in the NSE Nifty 50 index, over the past two quarters. A stronger finish to the fiscal year could signal a broader economic recovery, backed by both urban and rural consumers as well as government policies.
While uncertainties in global trade remain a challenge, India Inc. appears to be in a solid position for revenue growth, steady profit margins, and selective but strategic investment in key sectors.
India’s Economy Expected to Grow 6.2%-6.3% in Q3 FY2025: SBI Research
India’s economy is projected to expand by 6.2% to 6.3% in the third quarter of the 2024-25 financial year, according to estimates from SBI Research. This forecast is supported by strong economic indicators, despite global uncertainties and supply chain disruptions.
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