Investment growth weak in India: S&P

Rating agency Standard & Poor's (S&P) says it does not find reflections of robust macro economic data in India with the recent revision by the Central Statistics Office in micro data for companies.

In a study, it said investment growth was weakening in the country and earnings growth of companies were flat. There had been a logjam in policy making by the previous government and signs of revival were not apparent.

The agency is not sure if the Narendra Modi government will be able to revive stuck projects and whether these will lead to a pick-up in earnings of companies.

"Despite the recent upward revision to its gross domestic product growth data, India's weak investment (and relatively flat earnings) is clearly apparent in the micro data," the rating agency said, in its recent study, on the economies of India, China and Indonesia.

S&P studied trends in four segments of these economies -- consumer discretionary, energy, industrials, and materials (including mining). The data was taken from  company financials' database.

In India, the study revealed, earnings growth in companies among the sectors studied had lagged investment and debt almost every year since 2008. These trends, especially lagging earnings growth, generally hold across all four major sectors.

For instance, Ebitda (earnings before interest, taxes, depreciation and amortisation) was 327 points (average across all firms and then indexed to 2003 levels) in 2013 in India. Capital expenditure was 413 and debt was 496. In 2008, Ebitda was 183 points, capex 335 and debt 244.

S&P interpreted these to imply there was a gridlock in policymaking after the global financial crisis that led to dormant assets and stagnant earnings; that is, investment projects were not brought to fruition.

"With the Modi government still seeming to spur confidence generally, we don't know if previously funded assets will be activated and, even more important, if earnings will pick up," the ratings agency said.