India's booming growth has an earnings problem: Manishi Raychaudhuri
INDA•India's rapid economic growth has not translated into strong corporate earnings: earnings growth has remained in single digits as rising costs and weak pricing power pressure margins. FactSet consensus estimates project Indian earnings to grow at a 16.5% compound annual rate over 2027 and 2028.
1. Growth and earnings diverge
India's real GDP growth ranged from 7.7% to 8.6% over five quarters, but sluggish earnings have weighed on equities. The Sensex rose 8% over that period and was down roughly 15% through October, while the index has declined more than 20% since momentum reversed in late 2024.
2. Costs pressure margins
Higher energy, raw-material and transport costs have squeezed companies' margins, while weak demand and competition have limited their ability to pass costs on. Consumer durables' EBITDA margins fell to 7.4% in the September quarter from 11.7% two years earlier; technology-services margins declined to 21.17% from 22.37%.
3. Possible earnings recovery
Bank credit growth accelerated from 9% year on year in May 2025 to 19.4% in September, and industrials and technology hardware are experiencing strong earnings growth. FactSet consensus estimates project Indian earnings to grow at a 16.5% compound annual rate over 2027 and 2028, though the article notes that estimates could be downgraded and that prolonged conflict could keep commodity prices high.
