Crisil sees corporate revenue growing 8-9% in FY18

This means govt and public sector will have to continue to do the heavy-lifting next year as well

Credit quality of corporates is showing signs of gradual recovery driven by firm commodity prices, stable macros and lower interest costs, which will help boost their revenue growth to a five-year high of 8-9 per cent in fiscal 2018, rating agency Crisil said on Thursday.

"Revenue growth of India Inc, driven by consumption, is likely to hit a five-year high of 8-9 per cent in fiscal 2018, even though operating profit margins are likely to remain range-bound as higher commodity prices will take a toll on end-user sectors," Crisil managing director Ashu Suyash said in a report.

Citing absence of any fiscal and monetary stimuli and unsupportive global environment, its annual economic outlook, sees only a mild growth in fiscal 2018 at 7.4 per cent.

"We see only a mild recovery in the economy, with GDP edging up 30 basis points to 7.4 per cent over fiscal 2017, driven by pent-up consumption demand after demonetisation," she said.

However, she was quick to rule out any revival in investments saying though the "declining interest rates over the past two years is salutary, it won't be enough to revive the investment cycle till other factors, such as demand and deleveraging, also turn conducive".

This means that the government and public sector will have to continue to do the heavy-lifting next fiscal as well, especially on the infrastructure side, to ensure growth stays the course.

The agency also said the economy is witnessing resets in growth expectations and ecosystems which is likely to have more long-term benefits.

"The ongoing resets would lead to consolidation in three ways - in consumption after the note ban shock; in infrastructure through deployment of innovative financing; and in market share of companies because capacities will change hands for various reasons such as competition, GST, policy action, formalisation of the economy and stressed assets resolution," she said.

The rating agency believes the banking sector will see lower slippages to NPAs, but did not elaborate.

Similarly, signs of turnaround are increasingly visible in some commodity-linked sectors and in the mid-sized EPC segment.