Monday, May 27, 2024

Number of foreign businesses exiting India surpass new entrants

Image used for representational purpose only.

Image used for representational purpose only.
| Photo Credit: Getty Images

The number of foreign companies quitting India have exceeded the number of new entrants since 2018, with new foreign businesses setting up shop in the country falling to at least a five-year low in 2022, as per official data. 

While almost 470 new foreign investors set up business in India between 2018 and 2022, more than 550 overseas firms ceased operations and become inactive in the same period. During this period, 2019 was the only year when the number of foreign companies that started India operations (137) outnumbered the 133 firms that shut down and became inactive. 

In 2022, 64 new foreign investors started operations in India, the lowest figure since 2018 while just one new overseas business had begun operations (as of March 9) since the beginning of 2023. 

Firms exiting the country last year added up to 78, while two firms have closed operations between January 1 and March 9, data shared by the Minister of State for Corporate Affairs Rao Inderjit Singh in the Rajya Sabha last week show. 

Investment experts cautioned that the data needed to be interpreted judiciously.

“A company may have been active in previous years and then shut down or become inactive in the said period,” said Sawant Singh, co-founding partner at Phoenix Legal. “Moreover, the reducing trend of companies setting up in recent years is on account of COVID and global recessionary trends,” he pointed out. 

Going forward, Mr. Singh said efforts made by the government to attract foreign capital would likely lead to an uptick in new companies setting up business in India.   

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