New Delhi:New Indian companies are more resilient and better prepared to achieve economies of scale than their counterparts in other countries, showed the analysis of the data of the companies registered in the country in the last three decades.
According to the data analysed by SBI Research, nearly 45 percent of the companies in India stay in business for more than 20 years against the global average of 5 years. According to Soumya Kanti Ghosh, Group Economic Adviser of State Bank of India, the survival statistics of India Inc. by analysing and examining the firms registered in the last three decades and their status of activity reveals some interesting observations.
Globally, it is believed that not many new firms survive beyond 5 years. In the US, for instance, the survival rate of new firms after six years was found to be around 40 percent. But the Indian data shows that, on average, new firms have a higher survival rate here of around 45 percent since the early 90s. The data showed that during the pre-liberalisation period (before 1990), the survival rate was around 41 percent though the number of companies started was quite low, often started by promoters with enough equity, and hence a meaningful result cannot be deduced between two phases.
Companies formed in the last 2 decades have better survival rate
Data shows that the companies formed since 2000 have a higher likelihood of survival compared to those that have been established earlier. The survival rate also improves for firms born in recent years. Moreover, the survival and growth of firms have been much better in the western and southern parts of the country as they are ahead of the northern and eastern parts of the country in economic development.
On average, 45,600 new firms were registered every year in India, in the period between 1980 and 2018. The formation of new companies grew at an average annual rate of 7.5% during the around 40-year period. However, the number of firms formed during 2018-2022 has been much higher in comparison, with policy initiatives, regulatory reforms, ease of doing business and a spirit of entrepreneurship sweeping across the nation.