India’s active companies cross the 2 million mark for the first time

Corporate India crossed a major milestone in December, with the cumulative number of “active” or operational companies breaching the two-million mark.

This reflects a brisk formalization of the economy, aided by robust investor optimism about longer-term growth, structural reforms and easing compliance burden in recent years, a senior government official said.

The increase from 1.5 million to nearly 2.02 million active companies—a proxy for the formal sector of the economy—occurred in a record time of just three years, showed the latest data sourced from the corporate affairs ministry. The expansion coincided with India’s resurgence after the Covid-19 pandemic as a key contributor to global growth.


More than 200,000 operational companies were added in 2025, a fresh record, amid higher business incorporations and fewer failures.

The country had 0.97 million operational companies at the end of May 2014, when Prime Minister Narendra Modi took over, and almost 1.23 million in the beginning of July 2017, when the goods and services tax regime, one of the significant steps towards formalisation, was introduced.

“The high number is despite the fact that the government has expedited the process of closure of defunct or ailing units and intensified the crackdown on the so-called ‘shell companies’ in recent years,” said the official, who did not wish to be identified.

The numbers also suggest a large number of new entrepreneurs, on top of legacy businesses, are setting up units, experts said.

In December alone, as many as 26,597 companies, including foreign ones, got incorporated, more than double from a year before, while only 1,099 companies saw voluntary closure.

The government arrives at the number of ‘active’ companies after excluding those that are already closed or facing liquidation or under the process of getting their names deregistered.

Apart from robust economic growth, government initiatives such as Startup India, Make in India, Digital India and production-linked incentive schemes have created a conducive environment for new businesses, said Tahira Karanjawala, partner at law firm Karanjawala & Co.

Simplified compliance and company formation processes, and the recent liberalisation of labour laws have enhanced ease of doing business, she said, adding that easy registrations of small and medium businesses through the Udyam portal have brought a large number of informal units into the formal sector.

“Furthermore, there has been a considerable rise in the availability of venture capital and angel investments in India,” Karanjawala said.

Shankey Agrawal, partner at BMR Legal, said, “Incorporating a company is so much simpler and cost-effective than before.”

Moreover, he said, deregulations and decriminalisation of minor corporate defaults have led to improved business confidence, fuelling the trend of formalisation of businesses for better access to credit and contracts, as well as for obtaining limited liability protection.

The spurt in company incorporations has been driven by the country’s “strong macroeconomic performance, heightened cross-border investment and outsourcing, and geopolitical realignment of global supply chains favouring India as a stable and neutral jurisdiction”, said Noorul Hassan, executive partner at Lakshmikumaran & Sridharan Attorneys.

India has remained the world's fastest-growing major economy since 2021-22 and is expected to remain so at least for the next two years.

The scale challenge
A record number of incorporations presents new challenges as well. An overwhelmingly large percentage of operational companies are small entities that need to build scale to stay competitive, experts said. Governments, especially at the state level, must improve the business climate through sustained deregulations and reforms to let small units grow.

Senior central government functionaries have recognised the need for further deregulations and reforms, they said, and have pledged more steps, while exhorting states to do their bit.