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Indian firms are expected to post 7-8% revenue growth in the March quarter of the current fiscal year, driven by a pick-up in rural demand and higher government expenditure, says rating agency ICRA. The growth comes on the back of a consistent revival in earlier quarters, with revenue growing 6-7% in the December 2023 quarter. Operating profit margins are also anticipated to remain at 18.2-18.4%, as has been the case in recent months. Private capital spending, however, is still cautious because of geopolitical tensions, although investment in high-growth areas such as electronics, semiconductors, and EVs is anticipated to persist under government-initiated PLI schemes. Rural demand, which was subdued in early 2023, is expected to stay robust in the first half of 2025, led by healthy kharif crop production and supportive rabi season conditions. A well-distributed monsoon in 2025 will be critical in maintaining this growth.
Indian firms are likely to record a 7-8% revenue expansion during the March quarter of the current fiscal year due to rural demand revival and a pick-up in government spending, said local rating agency ICRA. It was preceded by a 6-7% rise in revenues during the December 2023 quarter, buoyed by festival-driven demand and reviving consumer confidence. Advertisement
Although revenue prospects are optimistic, private capex is set to remain cautious as companies navigate geopolitical risks and a muted projection for India's merchandise exports. Investment in certain high-growth areas such as electronics, semiconductors, and EVs will, however, continue, especially under the government's production-linked incentive (PLI) schemes, which have been a major investment driver in these spaces.
India Inc.'s operating profit margins (OPM), which have been on an uptrend, are expected to hold steady at 18.2-18.4%. This is based on the recovery witnessed in recent quarters, with the margins increasing from approximately 17.5% in the September 2023 quarter to 18.2-18.4% in December 2023, as stabilizing input prices and rising consumer demand helped deliver better profitability.
ICRA's Senior Vice President & Co-Group Head of Corporate Ratings, Kinjal Shah, said rural demand is likely to remain firm during the first half of 2025, fueled by a strong kharif crop production and favorable rabi season conditions. This is a significant improvement from the beginning of 2023 when rural demand was sluggish, influenced by inflationary pressure and unpredictable monsoon activity on farm incomes. But the sustainability of this rebound will be contingent upon a well-spread monsoon in 2025, which continues to remain pivotal in ensuring agricultural production and rural economic health.
In spite of a prudent attitude towards private capex, some sectors have remained investment-hungry over the last few quarters. Sectors like renewable energy, EVs, semiconductors, and electronics manufacturing have registered consistent capital inflows, especially under the PLI scheme, which has been a key driver in inducing fresh investments.
ICRA's estimates point to sustained revenue expansion for Indian businesses, with rural demand improving steadily and government expenditure being a key contributor. The 7-8% revenue growth estimate for the March quarter is in line with the uptrend observed in the earlier quarters, which supports optimism in the overall economic recovery. While operating profit margins are likely to be constant at 18.2-18.4%, this momentum will continue to rely on major economic indicators like inflation patterns, consumption spending, and rural incomes.
In the investment space, private capex continues to be cautious with international uncertainties, but government incentives continue to favor industries such as semiconductors, EVs, and electronics. The PLI scheme has been a prime mover of such investments, and additional policy thrust can further increase their growth. Rural demand, which was showing weakness in the early part of 2023, has bounced back and will continue to remain robust in the first half of 2025, as long as a conducive monsoon allows for agricultural productivity. Overall, India Inc.'s growth path looks firm but external factors including global trade conditions and domestic farm trends will play crucial roles in determining long-term stability.
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