India Inc grows in record numbers, reflecting rising economic optimism

India added a record number of companies and limited liability partnerships (LLPs) in the first half of this fiscal year, reflecting growing optimism about the country's business climate and economic growth prospects over the medium to long term despite near-term external headwinds, senior government officials said.

As many as 120,966 companies and LLPs were incorporated between April and September, up 11.4% from 108,583 a year before, according to the latest data compiled by the ministry of corporate affairs (MCA).

The record incorporation comes despite complaints of technical glitches involving the latest version of the MCA21 portal for corporate filings and amid a continued crackdown on shell companies. "This is a reflection of the government's initiatives to reduce Indian Inc's compliance burden, decriminalise several minor offences and remove redundant laws," said one of the officials.

Finance and corporate affairs minister Nirmala Sitharaman last week said the current NDA government had scrapped 39,000 unnecessary compliances and 1,500 archaic laws.

Separately, a senior finance ministry official said: "The (record) company incorporation is one of the several indicators of the underlying strength of the Indian economy; it also suggests strong prospects of consumptions of both goods and services. The supply side is responding to strong demand prospects".

"The fact that India remains a bright spot amid a global turmoil is also adding to the confidence of entrepreneurs. The Chinese slowdown too has raised the prospects of order flow into India," he added.

The elevated company incorporation complements some other gauges that show strong growth, including goods and services tax collections, the purchasing managers' index (PMI) for services and manufacturing and credit offtake, he said. While PMI for services scaled a 13-year high in September, the manufacturing index, despite hitting a five-month low last month, continued to remain strong and way above the historical average.

According to the Reserve Bank of India's latest bi-monthly consumer sentiment survey, released on October 6, general economic outlook and the prospects for employment, income and spending are expected to improve further over the next one year. The future expectations index has hit a four-year high in the latest survey round.

The Business Confidence Index of the Confederation of Indian Industry hit a three-quarter high between July and September, driven by "resilient domestic demand along with sustained government spending and deleveraged balance sheets" of companies and banks. Companies expect the festive season this year to spur greater sales of consumer goods than a year before.

India will remain the world's fastest-growing large economy in this fiscal year and the next, expanding at 6.1% and 6.3%, respectively, which would be more than double the global average, according to the International Monetary Fund.