With poor improvement in the global economic outlook and poorer one for the Indian economy, corporate houses have experienced moderation in growth, which halved to 9.1 percent in 2012-13. This is vis-a-vis 18.5 percent growth in sales in 2011-12 fiscal, according to data released by the Reserve Bank of India on Thursday.

The apex bank released a compiled report of financial results of 2,931 private companies which revealed that firms in all three sectors – manufacturing, services other than IT, as also IT – experienced a decline in sales growth on a year-on-year basis.

“Most industries followed the general trend of lower sales growth and lower profit margins in 2012-13 compared to 2011-12. Interest expenses as percentage of sales increased across all sectors and size classes,” the apex bank said in a statement.

Average sales figure has halved from 18.5 percent (for 2,679 companies) in 2011-12 to 9.1 percent (for 2,931 companies) in 2012-13, the RBI said.
The report also pointed that among the three sectors, non-IT services remain neck-deep in crisis. According to the report, the sector continues to post negative growth in net profit at 29.6 percent, showing a slight improvement from the negative growth of 42.2 percent in 2011-12. While the IT sector is best placed at 7.1 percent growth in sales, although it fell from 23.3 percent in 2011-12, the manufacturing sector has shown remarkable improvement, posting net profit of 3.6 percent – up from the negative growth of 21.7 percent in 2011-12.

Owing to the slow pace of reforms and consistently declining demand in domestic and international markets, the corporate sector outlook remains grim. The noise surrounding a huge chunk of the corporate debts turning bad is only getting louder by the day. According to the Credit Information Bureau India Limited (CIBIL), companies have defaulted on repayment of loans worth Rs 23, 802 crore till March this year.

While the government and RBI have directed banks to boost their loan recovery mechanisms by getting after wilful defaulters, corporate houses have been crying foul over hurdles they face in getting projects approved, which results in their investments remaining idle without generating any returns.