India

Indian companies set to trump Chinese counterparts

02 Aug 2016 | By Supriya Kaur
Make in India: Reaping Dividends

Credit rating company, S & P Global, studied top 200 Indian companies against its Chinese peers.

Reports published today puts the performance of Indian companies a few notches above the Chinese.

The ameliorated performance is being attributed to increased spending by the Government of India's flagship program 'Make in India'(despite chronic infrastructure bottlenecks).

In context: Make in India: Reaping Dividends

AboutMake in India

Make in India was launched in September 2014 by the Government of India. It's an initiative to make India a world renowned manufacturing hub.

It primarily focuses on improving the overall business environment in the country by simplifying processes to do business.

The program encourages not only domestic manufacturers but is also keen to attract overseas companies to establish a presence here.

What's workingIndian Companies vis-a-vis Chinese

S & P's report suggests listed Indian companies have to deal with much less government influence as compared to Chinese companies.

This results in limiting flexibility of Chinese companies in adjusting capital spending which eventually results in lesser profits.

In comparison to private Chinese companies, Indian private entities perform better than their Chinese counterparts as well as Indian Government related entities.

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Indian companies vis-a-vis Chinese companies

What's not workingIndian companies vis-a-vis Chinese companies

Despite increased spending under Make in India, poor infrastructure continues to hamper their performance.

The power sector, always considered a weak-link, has however recently begun to show some improvements.

On the other hand, in comparison to the Chinese, transportation infrastructure in India continues to suffer from chronic bottlenecks and is greatly in need of a stable regulatory environment.

DetailsRed flags for Indian companies

According to S & P, credit risk is India appears to have peaked. However Indian companies do face the risk of debt contraction in the future.

30 of the top 200 companies surveyed by S & P, account for 60% of the net debt.

Considering interest rates are higher in India compared to other Asian countries, financial stress is a likely outcome.

02 Aug 2016Indian companies set to trump Chinese counterparts

Standard & Poor Global

S & P's history can be traced back to 1860: Henry Poor, a business analyst, first published "History of Railroads and Canals in the United States", the foremost in financial analysis. In 1941 Poor's Publishing merged with Standard Statistics to become Standard & Poor's corporation.