New Delhi: In a year in which personal income taxes have surpassed corporate taxes in India, amid reports of unprecedented wage stagnation and layoffs, the Reserve Bank of India has reported that profitability of Indian companies has risen nearly threefold between 2020-21 and the financial year 2025.

According to analysis that the RBI has included in its October bulletin, during COVID, despite a contraction in sales, decline in raw material cost due to softening of commodity prices, subdued wage growth, along with the favourable base effect, net profit of corporates at the aggregate level rose sharply by 115.6%.

This led to the net profit margin surpassing pre-COVID level.

In 2025, the corporate profit-to-GDP ratio for the Nifty-500 Universe remained at 4.7%, marking a 17-year high, according to a note by Motilal Oswal. Notably, for listed India Inc., the ratio stood at 5.1%, at a 14-year high. In the last quarter, India's GDP growth itself slowed down to 6.5% in 2024-25 – the slowest since the pandemic.

According to a recent report by JM Financial Institutional Securities, as cited by Economic Times, the share of personal income tax in total direct taxes rose sharply from 38.1% in FY14 to 53.4% in FY24, while corporate taxes declined from 61.9% to 46.6% over the same period.

The profits of India's corporates reveals the picture of India's grave economic inequality, where the top 10% of the Indian population holds 77% of the total national wealth. 73% of the wealth generated in 2017 went to the richest 1%, found Oxfam, while 670 million Indians who comprise the poorest half of the population saw only a 1% increase in their wealth.

Experts also constantly highlight that while India has been among the fastest-growing economies in recent years, it is a country of paradoxes, showing high growth with low job creation, high output with low productivity, rising aggregate wealth alongside deepening inequality, and booming urban sectors amid persistent rural distress.

'Corporates were able to pass on the rising input cost partially to their customers'

During the post-COVID period, with sharp rebound in sales growth led by pent-up demand, corporates’ profit increased significantly from Rs. 2.5 trillion in 2020-21 to Rs. 7.1 trillion during 2024-25, the RBI bulletin says. Consequently, net profit margins improved and reached to double digit level in 2024-25, driven by the manufacturing sector.

While net profit margin of IT sector moderated during the post-COVID period due to slowdown in activities coupled with higher salary outgo, the net profit margin of non-IT service sector remained in the negative zone since COVID before returning into positive territory in 2023-24.

In contrast to the net profit margin, operating profit margin exhibited relatively lower volatility at aggregate level. However, the RBI finds that operating profit margin of the non-IT sector remained volatile – from 19.2% in 2016-17 to the low of 11.7% in 2018-19 and then back to a high of 22.4% in 2023-24.

At aggregate level, benefiting from the lower input cost, operating profit margin improved by more than 200 bps during the COVID period from average margin seen during the pre-COVID period. However, with the fading off of the COVID led pent-up demand and rising commodity prices, corporates were able to pass on the rising input cost partially to their customers, as reflected
in moderating operating profit margin during post-COVID period.

The report found that large companies emerged as the primary contributors to overall profitability, consistently achieving higher operating profit margins compared to medium and small size firms. Despite the pandemic-induced decline in sales, firms managed to improve their operating profit margins through "effective cost-cutting measures and operational efficiency enhancements during the crisis."

The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.