Last year was tough on companies in India. A heavy debt burden and sluggish domestic demand were already weighing heavy on firms when demonetisation dealt the economy a body blow from which it is yet to fully recover, as the Economic Survey, tabled in Parliament on August 11, pointed out. Now, a report released by the Reserve Bank of India on Wednesday suggests that the ban of Rs 500 and Rs 1,000 notes in November hit some sectors harder than the government (or anyone else) expected. And smaller firms with an annual revenue of less than Rs 500 million were the worst affected.

These companies saw a sharp slump in their earnings even as sales for industry as a whole grew at a decent 7.2% on the back of a good performance by a few large firms, which somewhat neutralised the negative impact of demonetisation on the economy.

The chart above shows how firms of varying sizes in terms of annual sales fared in the last quarter of the previous financial year, 2016-2017. The Reserve Bank collects this data from company filings each year and issues a report that provides a snapshot of how the economy has performed from the perspective of listed private companies, except those in the financial business such as banks and brokerages.

As is evident from the chart, companies earning between Rs 250 million and Rs 500 million a year saw the deepest sink in their sales year-on-year as the growth rate decelerated to a negative 53.6% in 2016-2017 from a negative 19.3% in 2015-2016.

The trend remained the same for firms with annual revenues of up to Rs 10,000 million as they saw their sales contract at a faster pace in 2016-2017 compared to the financial year before that.

Bigger companies did better

However, the opposite trend was true for bigger companies as they saw their sales rise 9.5% year-on-year from 3.2% in the preceding period. This brought up the performance of the full spectrum of companies to 7.2%.

On a sectoral level, services companies were hit the hardest along with those in construction, telecommunication and real estate, the data showed.

This chart above shows how over the course of the full financial year that started on April 1, 2016 and ended on March 31, 2017, manufacturing recovered from negative growth to a decent single-digit growth of about 4%. At the same time, sales in the services sector turned negative on a year-on-year basis at -1.5% while the information technology sector’s growth slowed to 9% from 11% the previous year.

Manufacturing up, services down

While a 1.5% deceleration in the growth of the services sector may not seem like much, the sector saw its profits shrink by as much as 114.5% compared to a much lower rate of decline of 16.9% in the preceding year, the RBI said.

At the same time, the manufacturing sector saw its profits rise by 28% while the growth in the earnings of the information technology sector slowed from 14.5% in 2015-2016 to 8.7% in 2016-2017.

“Sales of services sector companies [other than information technology], however, contracted due to poor performance of real estate and wholesale and retail trade companies,” the central bank said in its press release. “The information technology sector witnessed moderation in sales growth.”