Corporate Investment Outlook: Asset Turnover Rises to 1.30, Weak Consumption Remains a Risk

The news

Bank of Baroda has published research showing that actual corporate investments, measured by gross fixed assets, have risen across a broad set of sectors in the first half of the current financial year. The study, released on November 11, examined the balance sheets of 2,010 non-financial companies from manufacturing and services, categorised into 31 sectors. It found that fixed-asset growth improved in 22 of those sectors compared with the same period last year, and three of the remaining sectors still recorded double-digit growth.

The sample’s asset turnover ratio — sales divided by fixed assets, an indicator of how intensively existing capacity is being used — rose from 1.14 in September 2025 to 1.30 in September 2026. Twenty-three of the 31 industries showed an improvement in this ratio, which the report says points to higher utilisation and could encourage further investment. However, HSBC Global Investment Research has flagged that real rural wages are declining, non-durable demand remains weak, and tractor sales have slowed. Low soil moisture and depleted reservoirs have affected winter sowing, and El Niño-related heat could shorten the grain-filling period and reduce yields, further hurting rural demand. The old worry of weak consumption may hamper sustained investment by companies.

What was the 2019 corporate tax rate cut?

In September 2019 the government slashed the base corporate tax rate for existing domestic companies from 30 per cent to 22 per cent, and for new manufacturing firms incorporated on or after 1 October 2019 that start production by March 2024 it was set at 15 per cent. The effective rate, including surcharge and cess, fell to 25.17 per cent for existing companies and 17.01 per cent for new ones. The move was announced through the Taxation Laws (Amendment) Ordinance 2019, which amended the Income Tax Act 1961, and it was later replaced by an Act of Parliament. The government said the cut was meant to revive private investment and growth, which had been slowing since 2011-12.

What policy measures preceded the investment data?

Since coming to power, the Narendra Modi government has sought to reduce the government’s role and incentivise the private sector, continuing the approach adopted after the 1991 economic reforms. Key measures include the Insolvency and Bankruptcy Code (2016), the Goods and Services Tax (2017), and a historic cut in corporate tax rates in 2019. Despite these steps, investment rates had been declining since 2011-12. In the following years, the government shifted focus to boosting consumption through personal income tax and GST relief, direct benefit transfers, and the Employment Linked Incentive scheme, which ties subsidies to job creation rather than production.

What do the asset turnover and GDP forecasts indicate?

The asset turnover ratio for the sample companies improved from 1.14 in September 2025 to 1.30 in September 2026, with 23 of 31 industries recording a higher ratio. This suggests better utilisation of existing capacity, which can naturally encourage companies to invest further. The immediate impact may be seen in Q2 GDP data due by end-November: the Reserve Bank of India has forecast 7.2% real GDP growth, but Bank of Baroda expects 7.4%, State Bank of India 7.8%, and HSBC 7.5%.

What are the risks to sustained investment?

HSBC Global Investment Research has pointed to declining real rural wages, weak non-durable demand, and slower tractor sales. Winter sowing has started on a weak note because of low soil moisture and depleted reservoirs, and El Niño-related heat could shorten the grain-filling period, further hurting yields and rural demand. In the urban informal sector, real wages are barely growing. Without stronger consumption, companies may lack the incentive to keep investing.