India’s TOP 500 Companies 2020

INDIA’S TOP 500 COMPANIES 2020 87 Indian economy had started losing steam during FY19 which was entrenched in FY20. In FY19, the slowdown in economic activity was more pronounced in the industrial sector wherein excluding construction, all other components like mining, manufacturing and electricity witnessed tepid growth largely due to the subdued demand conditions. Services sector on the other hand remained resilient in FY19 on the back of strong growth in financial services, real estate and professional services segment. The growth in construction and services sectors which had shown resilience in the previous fiscal witnessed a downfall in FY20. This coupled with a substantial moderation in the growth of mining, manufacturing and electricity sectors led the economy to move on a downward path even before the outbreak of COVID-19 in India. A healthy growth in the agriculture sector on the back of normal monsoon also could not cushion the fall in the GVA growth during FY20. Private consumption demand which had witnessed some revival in FY19 could not get further momentum and remained muted in FY20. In FY19, while enhanced purchasing power, supported by low inflation and strong growth in personal & consumer credit, supported private consumption demand, a slowdown in agriculture sector and labour-intensive exports capped its further recovery. The private consumption demand continued to remain sluggish in FY20 owing to decelerating rural and urban incomes subsequent to the lower food prices and depressed labour-intensive exports. The moderation in private consumption demand was pronounced in the high frequency indicators like sales of passenger vehicles & two- wheelers, consumer durables and domestic air passenger traffic. Moreover, tepid growth in government consumption expenditure during FY19 and FY20 exacerbated the overall demand conditions. Downfall in investment and stagnant consumption pulled down GDP growth Government expenditure fails to revive consumption growth -10 -5 0 5 10 15 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4FY20 % GDP consumption investment 0 5 10 15 20 25 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4FY20 % Tot al consumption GFCE PFCE Note: consumption = GFCE + PFCE; investment = GFCF: Gross Fixed Capital Formation GFCE: Government Final Consumption Expenditure; PFCE: Private Finance Consumption Expenditure Source: MOSPI There was a pick-up in investment activity during FY19 on the back of policy efforts like increased government spending on the road sector and affordable housing, expediting resolution of distressed assets and addressing the NPA problem of the banking sector. Nonetheless, since Q4 FY19, growth in investment demand started moderating and turned negative from Q2 FY20 as production and imports of capital goods witnessed contraction during this period. Dun & Bradstreet