Earnings of domestic companies are expected to remain sluggish over the next two to three years, according to a rating agency.

Besides, investments in the private sector are unlikely to show a growth till the second half of the fiscal year 2018-19 due to their "significant leverage and capacity underutilisation", said India Ratings & Research in a report.

The rating firm expects growth in earnings before interest, tax, depreciation and amortisation (Ebitda) of BSE 500 companies to come in the range of 12% to 14% in 2016-17 if there is an increase in public spending. These companies are expected to post an Ebitda of 5% to 6% in the current fiscal year.

"Although still an improvement over the 3.5 per cent growth witnessed in 2014-15, it is significantly below the growth numbers of 17-22 per cent achieved between 2009-10 and 2011-12 and the median growth of 17.5 per cent over 2001-2015," India Ratings said.

The analysis may come as a disappointment to the government as it has initiated various measures to pick up the investment in the country. The Reserve Bank of India (RBI) had cut the key lending rates by a total of 125bps in calendar year 2015 to boost the slowing corporate growth.

Despite a large cut in interest rate, the credit growth in the country has remained poor due to high debt levels of companies.

Bank credit growth, a major indicator of economic growth, hit a two-decade low in the fiscal year ending March 2015. Credit growth was up 9.52% in 2014-15, down from an increase of 13.83% in 2013-14.

India Ratings said a decline in profits during 2014-15 and 2015-16 was mainly due to lack of pick up in private sector investment. It said the growth in public investment had averted a sharp fall in profits.

It said changes in consumer shopping trends (from offline stores to online shopping), slowdown in China, a crash in commodity prices, and lack of pick up in agricultural growth have negatively impacted private consumption in the country.