Corporate India is expanding its footprint at a scorching pace. The number of “active” or operational companies in the country climbed 54% in just five years through October 2024, showed the latest data sourced from the corporate affairs ministry.
In absolute terms, the jump to 1.78 million from 1.16 million active companies is the highest for any five-year period, with officials and analysts attributing the surge to the country’s robust economic growth prospects over the medium-to-long term and greater ease of doing business.
The decriminalisation of dozens of minor offences under the Companies Act since 2019 also helped, they added.
The government arrives at the number of “active” companies after excluding those that are already closed or facing liquidation or under the process of getting their names stricken off from the registrar or lying dormant, from the incorporated ones.
The data showed 64.4% of the total incorporated companies remained operational as of October 2024, up from 59.5% five years ago, indicating a lower corporate failure ratio in recent years.
Maharashtra led the pack of states with 340,237 active companies as of October 2024, compared with 225,422 five years ago. Delhi and Uttar Pradesh now have 247,237 and 146,285 operational companies, respectively, against 199,500 and 75,119 in October 2019.
Uttar Pradesh has made big strides in these five years, having overtaken West Bengal, Tamil Nadu and Karnataka in housing active companies.
Change in Composition
The share of business services in the total number of active companies shrank over the past five years to 27% from 32%, while that of community, personal and social services (where government funding often plays an important role) accelerated to 12% from 7%.
The share of construction eased to 7.6% from 8.5%, the data showed. However, manufacturing and trading retained their shares at 20% and 13%, respectively.
Experts said high incorporations and lower rate of corporate failures have bolstered the number of active companies in recent years.
Robust economic outlook, relaxed foreign direct investment rules and the government’s bid to ensure greater ease of doing business, have spurred investments and pushed up company incorporations, according to Noorul Hassan, partner at law firm Lakshmikumaran & Sridharan.
India remains the world’s fastest-growing major economy, having expanded at an average rate of 8.3% over the past three years. It’s expected to remain so this fiscal year as well as the next, according to a forecast by the International Monetary Fund.
