10,000 Indian firms shut in 11 months

These companies downed shutters voluntarily and not due to any punitive action, minister says

More than 10,000 companies in India shut down their operations voluntarily since April 2000, according to a government data. During this period the country was in the grip of the Covid-19 pandemic and the government imposed strict lockdowns and travel restrictions to contain the spread of virus.

In a written reply to a query in Parliament, Minister of State for Corporate Affairs Anurag Thakur said: “A total of 10,113 companies during the year 2020-21 (from the month of April 2020 to February 2021) have been struck off under Section 248 (2) of the Act. MCA has not run any drive to strike off companies suo motu during 2020-21.”

Section 248(2) of the Companies Act, 2013, implies that the companies were shut voluntarily and not due to any punitive action.

The highest number of closures happened in Delhi (2,394 companies), followed by Uttar Pradesh (1,936), Tamil Nadu (1,322), Maharashtra (1,279) and Karnataka (836). These states are heavily industrialized and home to prominent manufacturing hubs.

The data was provided by the minister in response to a query by a member seeking state details of the number of registered companies that have gone out of business during the year 2020-21.

This data does not cover companies that are not registered and fall in the category of the unorganized or informal sector. According to government think-tank Niti Aayog, the informal sector employs approximately 85% of the country’s workforce. These companies were also badly hit when lockdowns were announced.

When Covid-19 cases started rising, the government imposed a nationwide lockdown from March 25 last year. In his announcement, Prime Minister Narendra Modi gave less than four hours’ notice to shut down the entire country, including factories.

It was initially meant for 21 days, but was later extended a couple of times and lasted two months. In later months, many states also imposed restrictions on movement amid spiraling coronavirus cases.

The country’s unemployment rate rose to a record high of 23.52% in April 2020, and the situation improved only after the lockdown norms were eased. During the lockdown period, there was an exodus of workers from big cities to the villages and towns they hailed from.

The Indian economy plunged into technical recession after its gross domestic product contracted for two quarters in a row. In the third quarter of this financial year, it posted a marginal growth of 0.4% from last year. The country’s National Statistics Office has projected that for the current fiscal year, India’s gross domestic product will contract about 8%.