Here’s what will power India Inc’s double engine race; high base effect no bar, companies set for fast growth

India Inc is expected to grow revenue in double digits in the next financial year 2023-24, despite global slowdown and interest rate hikes continuing to weigh. An analysis of 748 listed companies (excluding oil and gas, and banking, financial services and insurance firms) from fiscal 2011 onwards by CRISIL showed that corporate India will be driven by a 10-12 per cent revenue growth in non-commodity sectors, while on the other hand, commodity prices too are likely to remain benign. The revenue growth in FY 2023-24 will be over a 16-18 per cent on-year rise in the current fiscal 2022-23.

What’s driving the revenue growth?

An estimated 18-20 per cent on-year increase in non-commodity segments, 5-7 per cent growth in commodities coming off a high base, is leading the revenue increase in fiscal 2023. “Operating margin is expected to improve 120-170 basis points in fiscal 2024 aided by three factors — benign commodity prices, the full effect of price hikes taken in fiscal 2023 playing out, and volume growth,” CRISIL said. According to the report, margin expansion in fiscal 2024 is projected to be broad-based, with margin improvements across sectors. This is because the cooling commodity prices are reducing costs and revenue is getting a lift from volume expansion.

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Not only this, government policies too will continue to push industrial capex. Infrastructure spending will drive 12-16 per cent growth in overall capex in the next fiscal and this will facilitate the initial target of achieving nearly 75 per cent under the National Infrastructure Pipeline by fiscal 2025. Almost half of this incremental capex is being driven by the PLI scheme and new-age sectors, said CRISIL. With the PLI scheme supporting demand, merchandise exports are expected to grow 2-4 per cent in fiscal 2024 after an estimated increase of 507 per cent in fiscal 2023.

Also, capital utilisation across sectors will top decadal averages despite modest growth in the domestic and export markets. However, many sectors still are showing below-peak utilisation. “Overall industrial capex is seen rising to nearly Rs 5.7 lakh crore on average between fiscals 2023 and 2027, compared with Rs 3.7 lakh crore in the past five fiscals,” said Suresh Krishnamurthy, Senior Director, CRISIL MI&A.

Further, consumption too will increase but towards premium products. “As for domestic demand impetus, growth in urban incomes and government employee payouts should once again outperform rural incomes in fiscal 2024. This would continue to skew consumption towards premium products and stoke the two-speed recovery underway,” said Hetal Gandhi, Director – Research, CRISIL MI&A.