At 72%, service sector dominates new business registrations in April

A steady rise in registration of businesses in the services sector is shifting the composition of active companies in the country more towards services. At the end of April this year, 65% of the 1.7 million active companies were in services, up from 61% in March 2015. In the just-concluded financial year--FY24, registration of new businesses in the services industry accounted for 70-72% of all businesses every month, except in April 2023, when it was 69%, data showed.

Highest number of new registrations within the sector

Within the services sector, the highest number of new registrations falls in the category of community, personal and social services, which covers a broad range of businesses including schools and coaching centres, hospitals, diagnostic centres, clinics, fitness centres and professional associations.

Business services, trading, real estate and renting, transport, storage and communications are among the other areas where new service sector businesses are getting registered, data showed.

Entrepreneurship in the service sector is seeing a strong boost as the capital requirement in this industry is much less than that needed for setting up a production unit. Despite accounting for 72% of new business registrations in April, service enterprises accounted for only a little more than two fifths of the ₹1,136 crore paid-up capital of all the new companies registered in the month. Paid-up capital is only a part of the authorised capital of a company and refers to the investments already made by shareholders. The total capital deployed by a company also includes debt.

Also Read: Indian Startup Registration: Get your business registered in 5 simple steps

Manufacturing companies, on the other hand, accounted for about 22% of the paid-up capital of all new businesses registered in the month, although they accounted for only 15% of new registrations, data showed. Data from the statistics ministry released on Friday had shown that services industries, including utilities, construction, hospitality, transport, communication and financial services had grown in high single digits in FY24.

According to experts, the initial financial requirements and the procedural requirements are less for setting up a business in the services industry. “Services is the largest sector in the economy, accounting for more than half of the gross value added (GVA). A new business in the services sector can be started with a much smaller set-up compared to a manufacturing unit, where the requirements of capital, land, licences and clearances would be much more," explained Devendra Kumar Pant, chief economist at India Ratings and Research (Fitch Group).

The government has been taking several steps to give a strong boost to investments in the manufacturing sector. A scheme meant to encourage setting up new factories with a concessional 15% corporate tax has expired in March. Industry representatives expect an extension of it in the full budget for FY25 to be presented next month.

Also Read: Govt asks businesses to register under GST by 30 July

Latest data also throws light on the composition of professionals qualifying for becoming directors on the board of companies. Of the 39,743 new Director Identification Numbers (DINs), an identity number issued to professionals qualifying for becoming directors, 43% are in the age group of 31-45 years. Data also shows a lot more needs to be achieved in boardrooms in terms of gender parity. Only 33% of all director identification numbers issued in April are for women. The representation of women among those qualifying to be directors, is the highest in the age group of 31-45 years. Younger women in the age group of 18-30 years only account for a little more than a fourth of all DINs issued in that category, showed the data.