New Delhi: In what suggests GST triggering formalization of the economy and entrepreneurial spirit on a high, the number of new business registrations rose to a record high in 2020-21 even as Coronavirus hit the economy hard.
Agriculture and manufacturing sectors accounted for a higher share in overall new registration signalling bullish sentiments.
As per a study by Dun & Bradstreet, birth rate of new businesses showed a healthy pace of increase from 7.8 per cent in FY16 to 10.2 per cent in FY20 and further to 11.6 per cent in FY21, despite the pandemic and subsequent waves of lockdown.
The agriculture sector recorded the highest growth in new business registrations at 103 per cent in FY21. The sector observed 12,368 registrations in FY21 compared to 6,107 in FY20. The manufacturing sector recorded the second-highest growth in new business registrations at 50 per cent in FY21.
Commenting on the trend, Dun & Bradstreet Global Chief Economist Arun Singh said that the share of businesses being registered outside mainstream locations such as Mumbai, New Delhi, Bengaluru, Chennai, etc., is increasing.
“Top 10 cities accounted only for 42 per cent of all new business registrations in FY21 compared to 55 per cent in FY17. Various factors such as short product lifecycle, as in the case of agricultural products, non-tradeable consumables such as healthcare services, etc. could have necessitated business registrations where those products and services are consumed, given the logistics challenges during the pandemic,” he said.
A total of 195,880 businesses were registered in FY21, a record high. Most of the newly registered businesses are concentrated in sectors that witnessed a pandemic-induced spike in demand and 96per cent of the newly registered business had a paid-up capital of up to Rs 1 million.
Dun & Bradstreet’s research reveals that the historical survival rates of businesses that fall in this category are low.
“Hence, businesses that partner with such ventures need to continuously monitor their portfolio and establish red flag alerts to protect their capital. At the same time, it is also important to note that as newer businesses are entering the market, survival becomes a challenge for the existing ones. They have to adapt to the upcoming trends to stay relevant or risk going out of business,” cautioned Avinash Gupta, Managing Director & CEO (India) at Dun & Bradstreet.
An indirect tax expert said that big suppliers want to deal only with GST-registered vendors and hence small entrepreneurs have no choice but to enroll themselves with the government agency.
Additionally, he added that business sentiments remain high and people are bullish on American and European companies looking for investment destinations other than China in view of changing political order in the world.