The well being of India Inc has been a subject of appreciable dialogue in recent times, particularly since capital expenditure by the non-public sector has been tepid at the same time as the federal government has picked up the slack. In actual fact, because the outbreak of the Covid-19 pandemic, there was widespread dialogue of a Ok-formed restoration the place bigger companies recovered sooner from the pandemic than smaller ones.
Knowledge introduced within the Union Budget 2026-27 appears to bear this out. Just 877 or 0.88% of the 1.13 million companies that filed tax returns for FY24 accounted for two-thirds of India Inc’s profits before tax (PBT) for that fiscal yr. These are companies that reported PBT above Rs 500 crore within the fiscal yr, knowledge for which is supplied with a lag within the Receipts Budget yearly underneath the pinnacle Assertion of Income Affect of Tax Incentives underneath the Central Tax System. The info goes all the best way again to FY06, when a big pattern was first thought-about.
To make certain, the share of companies with PBT above Rs 500 crore has exceeded 60% of complete PBT yearly since FY21, hitting contemporary all-time highs every year. It elevated from 62.08% in FY21 to 62.54% in FY22, 62.59% in FY23, and 64.58% in FY24, in line with Budget paperwork.
Budget paperwork through the years present that the share of such companies was lower than 50% in FY06, rising above the midway mark within the years that adopted, with occasional dips, although it by no means declined under 50% after that yr.
The info additionally present that the share of companies that reported losses rose from 33.6% in FY06 to greater than 40% in FY13 and elevated to 47% in FY19, rising to an all-time excessive of 49.6% in FY21, which was marred by the outbreak of Covid-19 and the lockdowns introduced to gradual the pandemic’s unfold. The share of loss-making companies has dipped since then, decreasing to 45.35% in FY24.
In actual fact, the rise within the share of loss-making companies is commensurate with a fall within the proportion of companies that reported profits as much as Rs 1 crore. The share of the latter fell from 54.47% in FY06 to 48.91% in FY13, the primary time it dipped under the midway mark. The class witnessed a steep fall in FY18, when it fell to 41.04% from 47.67% the earlier yr, and hit an all-time low of 40.15% in Covid-hit FY21. It has recovered barely since then however was nonetheless at 41.86% in FY24.
General, the share of companies that reported profits before tax has not breached the 50% mark since FY18, when it first dipped under that mark. It has improved from the all-time low of 46% in FY21, rising to simply underneath 50% in FY24, although the share of loss-making companies and people who reported zero profits was nonetheless above 50%.
Considerably, Companies that made probably the most revenue paid much less tax than companies that made the least revenue. As an example, in FY24, the efficient tax charge for the companies that reported PBT above Rs 500 crore was 18.85%, which was decrease than the general charge of 22.47%, and far under the 23.68% that companies that reported PBT as much as Rs 1 crore paid.
The doc says the efficient tax charge “is the ratio of complete taxes (together with surcharge and cess) to the entire profits before taxes (PBT) and expressed as a proportion”.
Explaining the info, the Budget doc says the statutory tax charge, together with cess, for companies with revenue as much as Rs 1 crore was 31.20% (33.38% together with cess and surcharge) for companies with revenue as much as Rs 10 crore, and 34.94% together with cess and surcharge for companies with revenue exceeding Rs 10 crore. “Additional, for present companies which opted for the brand new concessional tax regime (decrease tax charge with out deductions and exemptions) underneath part 115BAA of the Revenue-tax Act, the statutory tax charge was 25.17%,” the doc notes.
The general efficient tax charge fell sharply from 27.81% in FY19 to 22.54% in FY20 and has hovered round that charge since. Nevertheless, that is nonetheless increased than the general efficient tax charge of 19.26% in FY06. The all-time excessive was recorded in FY16, when it was 28.24%.
The class that noticed the most important decline in efficient tax charges in these years was companies with PBT above Rs 500. The speed for the class dropped from 27.81% in FY19 to 19.14% in FY20 to an all-time low of 18.85% in FY24. The earlier low for the class was 19.1%. For companies that reported as much as Rs 1 crore of PBT, although the efficient tax charge has dipped in recent times, it was nonetheless increased than that for the companies with the best PBT.
Talking in regards to the well being of India Inc, Surajit Mazumdar, Professor on the Centre for Financial Research and Planning, Jawaharlal Nehru College, says it relies on how one defines India Inc. “If by India Inc we imply the most important companies, then they’re clearly doing nicely. However in the event you have a look at it as a complete, then there are indicators of misery,” he says.
Mazumdar says the Indian economic system is witnessing a double focus. The focus of revenue within the fingers of the wealthy and the focus of profits amongst only a few companies. These are additionally the companies which have very low efficient tax charges, he highlights. And these are additionally the companies during which funding is closely concentrated. “Measures to spice up ease of doing enterprise aren’t creating the circumstances for a broad-primarily based flowering of entrepreneurship,” Mazumdar says.
The info reveals two distinct phases of misery, he provides. The primary one started in FY13 as a result of of the delayed influence of the worldwide monetary disaster, and the second started in FY19 as a result of of the influence of demonetisation and the passing of the products and providers tax (GST), that seem to have impacted smaller companies. This was compounded by the Covid-19 pandemic and doesn’t seem to have reversed.
Talking in regards to the latest measures introduced to spice up consumption demand, just like the reduce in revenue tax charges in Budget 2025-26 and the following rationalisation of the GST charges, Mazumdar says the issue was the persistently low wages within the nation, which implies a big proportion of the inhabitants is unable to extend its spending past necessities.
“Non-public sector funding is just not rising as a result of sectors that may take in massive quantities of funding aren’t providing good returns. In manufacturing, there’s a demand constraint as a result of of inequalities within the economic system,” he says.
He provides that in such a scenario, the choice is exports. “However even there, the best way we’re integrated within the international worth chains is such that what we produce is closely depending on imports.”
Contemplating the exterior atmosphere, Mazumdar says the federal government ought to have used the Budget to extend expenditure. Nevertheless, the federal government is constrained on that entrance from the cumulative influence of the cuts in company and revenue taxes and GST, he provides.
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