In my last oped in Mint, using a macroeconomic identity that I call the ‘Theory of Everything,’ I noted that India’s aggregate corporate profit is 9-10% of GDP, of which listed firms’ profits have been 5.5-6% of GDP in recent years.
By the residual approach, it means that the profits of unlisted companies (including those in the quasi-corporate sector) amount to 3.5-4% of GDP or 35-40% of overall corporate profits.
Further, aggregate profits have been stable in the past decade, despite a decline in net corporate investments. This is because household spending (and lower savings), a larger fiscal deficit and a smaller current account deficit have supported overall profits. In this part, we discuss one of the most important reasons dragging India’s corporate capex down in recent years.
India’s aggregate corporate capex (covering private and public non-financial companies) has been stable at 14-15% of GDP over the past decade, lower than 17-18% in the previous decade and its peak of 21% of GDP in 2007-08.
Notably, the corporate sector’s share has fallen in India’s total investments, with households having turned into the largest investors and a hike in government capex as well.
Interestingly, the listed sector’s investments amounted to ₹12-13 trillion (averaging about 4% of GDP) in the four years from 2022-23 to 2025-26; this sector accounts for less than a third of aggregate corporate capex in the economy. This implies that the unlisted corporate sector invests as much as 10% of GDP, or more than two-thirds of aggregate corporate capex.
Earlier, I noted that the unlisted corporate sector makes about 35-40% of overall corporate profits and now I am saying that its capex is more than double the listed sector’s. How is this possible? This may sound very shocking, but please wait till you reach the end.
There are three pieces of evidence to support my argument that India’s unlisted corporate sector, which is largely invisible, is much larger than the listed space and contributes more to economic growth.
First, according to Union budget documents (Annexure-7 of the Receipt Budget), the aggregate profit before taxes (PBT) of all profit-making companies in India amounted to ₹39.2 trillion or 13.5% of GDP in 2023-24 (the latest available data); the PBT of all profit-making listed companies was about ₹22.4 trillion that year, which means the unlisted sector accounted for over 40% of PBT in India.
At the same time, total losses of all loss-making companies amounted to ₹7.6 trillion, less than 20% of which was accounted for by the listed sector. Previous data confirms that while the unlisted sector’s share has been stable in aggregate profits, the sector’s share of losses has increased in the post-pandemic period.
Second, total corporate income taxes collected by the government amount to about 3% of GDP. Based on cash flow statements, the listed sector accounts for less than half of these taxes and their share has actually increased in the last few years. If the unlisted sector pays more than half of all corporate income taxes paid in India, these companies must be making commensurate income as well.
Third, according to the Reserve Bank of India, aggregate corporate debt in India amounted to 48% of GDP in 2023-24 (latest data), which is likely to have increased to 50% in 2025-26, down from about 70% each in 2011-12 and 2012-13.
What is the overall debt of the listed sector? About 17% of GDP in recent years, down from its peak of 23-24% in 2011-12 and 2012-13. Again, the unlisted sector’s debt totals a third of GDP or two-thirds of aggregate corporate debt in the country. If these firms have taken so much debt, they must be producing goods and services that require capex.
Scanty data for the pervasive unlisted corporate sector in India does not reduce its importance. It accounts for 35-40% of aggregate PBT, contributes about half of corporate income taxes and makes up two-thirds or more of corporate debt and capex in the country. It may be hard to believe, but it’s a fact.
This plays an important role in explaining weak corporate capex in India. There are two pillars on which the narrative of a recovery in corporate capex are based: rising profits and lower leverage.
There is no doubt that the financial position of the listed corporate sector has improved remarkably in the post-pandemic years; however, it has worsened for the larger unlisted sector.
While the listed sector’s profits are closer to their all-time peak of 5.8% of GDP and its leverage ratio at 17% of GDP was at a two-decade low in 2025-26, the profits of the unlisted sector dropped to a 15-year low of 3.5-4% of GDP, while its debt-to-GDP ratio was at a seven-year high of 33% of GDP in 2025-26.
Thus, just like better finances of the former make a case for an increase in their capex, the deteriorating finances of the larger unlisted sector have dragged down corporate capex.
Accordingly, while the listed sector’s capex has averaged 4% of GDP in recent years versus 3.7% of GDP in the pre-pandemic period, it has fallen from 11-12% of GDP to about 10% for the latter.
What are the possible causes? While we look for an answer, divergent recovery trends within the corporate sector may be linked with a divergence in consumption trends (a ‘K-shaped recovery’). The rich have become richer in recent years and lower- to mid-middle income consumers are struggling.
The well-off constitute the consumer base for large listed companies that market branded products and services, while the latter are the key consumer base for unlisted firms. The premiumization trend observed in recent years fits in with this analysis.
Hence, while a capex recovery in the listed corporate sector has been weaker than its improved finances would suggest, the worsening finances of the larger unlisted sector has led to a slump in aggregate corporate capex in the country.
What are the other factors responsible for weak corporate capex in India? Can it rise in the near term? What are the key lessons for policymakers and what does all this mean for economic growth? I will discuss these questions in the concluding part of this oped series.
The author is an India Economist, executive director at CLSA India, and author of ‘The Eight Per Cent Solution’