How many companies registered to do business during the lockdown?
An analysis by How India Lives reveals that the number of company registrations started falling just before the pandemic hit.
One good indicator of the health of an economy is the number of new companies that have come up. Entrepreneurship thrives when there are positive projections about the economy and people are ready to invest their time and money in new ventures. By this measure, 2020 has naturally seen a huge setback. The number of companies and partnerships formed in April 2020 was only one-fourth of that formed during the same period last year.
In April 2019, about 14,500 new companies and partnerships were registered and the momentum continued over the next year with an average of 13,700 companies coming into being each month. The numbers started going down in February. The first signs of trouble came in March when the figure drop to 8,144 and in April it descended to 3,783, a drop of 72%. This is a clear indicator of the uncertainty about the future and conservative risk capital.
Another thing that indicates whether businesspeople are ready to risk their money is paid-up capital i.e the money invested in these companies. The monthly average paid-up capital has been dropping since December to attain new one-year lows in April. Even those companies that went ahead and registered during the pandemic, didn’t seen much actual capital coming their way.
When it comes to the type of companies that registered in the 13-month period till April 2020, a majority of them were in the services sector. This includes various kinds of business services, various kinds of community services, finance and insurance. Manufacturing came a distant second, followed by community, personal and social services, trading and construction. Almost 75% of the registrations came from eight states – Maharashtra, Delhi, Uttar Pradesh, Karnataka, Telangana, Tamil Nadu, Gujarat and West Bengal, in descending order. In terms of cities, Delhi and Mumbai accounted for 18% of new companies and 20% of limited liability partnerships registered. It’s worrying that these two cities are now severely hit by the pandemic, even though the lockdown has started lifting to various degrees.