ICRA, a leading domestic rating agency, projects a revenue growth of 7-8% for Indian companies in the March quarter, driven by strong rural demand and increased government spending.
- Rural demand and government spending to drive growth
- Private capital expenditure remains cautious amid geopolitical uncertainties
Driving Factors Behind Revenue Growth
The anticipated growth of 7-8% in the March quarter is largely attributed to a revival in rural demand, which has been bolstered by robust agricultural performance. The Government of India’s efforts in enhancing infrastructure and increasing public expenditure are also pivotal. “Rural demand is expected to be upbeat in H1 CY2025, aided by the robust output for most kharif crops and the favourable outlook for the ongoing rabi season,” stated Kinjal Shah, Senior Vice President & Co-Group Head of Corporate Ratings at ICRA. This optimistic sentiment reflects improved consumer confidence, which is crucial for sustaining demand across various sectors.
Challenges in Private Capital Expenditure
Despite the positive revenue outlook, ICRA anticipates that the private capital expenditure (capex) cycle will remain measured. Factors such as geopolitical uncertainties and a subdued outlook for merchandise exports are contributing to this cautious approach among businesses. Companies are likely to adopt a wait-and-see strategy before committing to large-scale investments. Nevertheless, sectors considered as sunrise industries, such as electronics, semiconductors, and electric vehicles (EVs), are expected to attract significant investments. This trend aligns with the production-linked incentive (PLI) programs initiated by the Government of India, which aim to enhance domestic manufacturing capabilities.
Future Implications for Indian Industry
The future outlook for Indian companies hinges on several critical factors. A return to normalcy in agricultural productivity, supported by a well-distributed monsoon season in 2025, is essential for maintaining the growth momentum. Additionally, the sustainability of operating profit margins, currently estimated at 18.2-18.4%, will depend on ongoing demand from consumers. As companies navigate these changing dynamics, the emphasis on sectors like EVs and electronics will play a significant role in shaping the economic landscape. “Beyond the current fiscal year, a stable agricultural environment will be crucial to support future growth trajectories,” Kinjal Shah added, underscoring the importance of agriculture in the broader economic recovery.
