Home / Economy / Company registrations stay the course during second wave

NEW DELHI : The second wave of the covid-19 pandemic had little effect on entrepreneurship, unlike the first wave which had a huge impact, official data on the incorporation of companies showed.

In April, 12,554 companies were set up in the country, compared with the 3,209 set up in the same month a year ago when a national lockdown was in place to contain the covid-19 pandemic.

In March 2021, the number of companies set up had risen to 17,324 when compared with the 5,788 set up in March last year. The March 2021 figure is the highest since January 2013 and is despite the mobility restrictions imposed in various parts of the country to fight the pandemic.

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In the first two months of this calendar year, too, the number of companies incorporated were in double digits, at 10,924 and 14,094, respectively, data from the corporate affairs ministry showed.

Incorporation of companies, the most popular legal form for doing business, indicates intent to invest, though actual economic activity may be influenced by a lot of factors.

Large state economies account for the bulk of companies registered every month. Maharashtra led the field with the formation of close to 2,300 companies. The state, along with Delhi, Uttar Pradesh, Karnataka, Tamil Nadu, and Telangana, accounted for 60% of the companies incorporated in April.

Among sectors, services accounted for 63% of all companies set up in April.

Companies set up in the agriculture and allied services segment in April accounted for 7% of all new companies, a growing area of investor interest with a normal monsoon remaining a positive trigger for the rural economy. This segment accounts for about 4% of the overall 1.35 million active companies in the country.

The Reserve Bank of India (RBI) said last week that, unlike in the first wave when the economy had come to an abrupt halt because of a nationwide lockdown, the impact on economic activity is expected to be muted in the second wave, with restrictions on mobility being regional and nuanced.

Moreover, people and businesses are adapting to pandemic working conditions, RBI governor Shaktikanta Das said.

However, the impact of the second wave was visible in the sequential moderation in goods and services tax (GST) collections in May; e-way bills generated during the same month that will be reflected in June GST receipts; a decline in manufacturing activity to a 10-month low, and the first contraction in services activity in eight months indicated by the IHS Markit purchasing managers’ indices.

Besides the number of companies set up, the aggregate authorized capital also came off from the peak seen in March of 4,145 crore to 1,483 crore in April, the corporate affairs ministry data showed.

Credit rating agency Crisil Ltd on Monday lowered its base-case gross domestic product (GDP) growth forecast for FY22 to 9% from 11% earlier, because of the second wave’s impact on investment and private consumption.

The agency also forecast a pessimistic scenario of 8% growth in case of downside risks to growth from a third wave of the pandemic or slower than anticipated vaccination pace.

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