New business registrations surge 37% in February, signal strong startup sentiment

New Delhi: New company registrations surged to 24,136 in February, 37% higher than a year ago and the second highest in the current financial year, indicating strong entrepreneurial sentiment and formalization of economic activities.

Data from the ministry of corporate affairs showed registrations rebounded after slowing in October and November, when just over 15,000 and nearly 14,000 companies, respectively, were set up. Registrations climbed to about 23,280 in January before accelerating further in February.

The majority of new businesses are closely held, private limited companies. The average paid-up capital of companies formed in January, for example, stood at ₹600,000, suggesting that entrepreneurship is being driven by small businesses. The authorized capital or the maximum capital new businesses are allowed to raise remains two to three times the paid-up capital, data showed, indicating future investment potential.

New government companies accounted for only a handful of incorporations each month and were limited to entities managing social sector initiatives, power transmission, or other utility businesses.

Fresh business registrations were dominated by services sector, particularly IT services, consultancies and professional services. Nearly 300 AI-related businesses are set up on average every month. In February, 248 AI-focused companies were formed, data showed.

The dominance of the services sector is in line with the make-up of the economy, with this sector accounting for more than half of the economic output. Wholesale and retail trading is another significant area of new business registrations, signalling formalisation of trading activities, aided by the government’s digital push, data showed.

Amit Maheshwari, managing partner at AKM Global, a tax and consulting firm said the 37% year-on-year jump in company registrations is a strong indicator of improving business sentiment and continued formalisation of the economy.

“The sustained momentum, with February marking the second-highest incorporations this financial year, suggests entrepreneurs are positioning early for the next growth cycle. While registrations alone do not guarantee economic expansion, the trend clearly signals confidence in India’s regulatory and growth framework,” said Maheshwari. India’s economy is projected to grow at 7.6% this financial year.

Experts also said that the acceleration in company registrations is not merely cyclical, it is structurally and institutionally driven.

“The government’s Startup India framework has significantly altered the entrepreneurial risk-reward matrix by providing tax holiday eligibility to DPIIT-recognised startups, calibrated relief in angel tax provisions (subject to prescribed conditions), expedited exit mechanisms under the Insolvency and Bankruptcy framework, and reduced compliance thresholds for small companies and one person companies,” said Rajat Mohan, partner at AMRG Global.

Mohan explained that the country’s tax regime itself offers structural advantages to corporate entities, including concessional corporate tax rates under the new regime, clarity in dividend taxation and greater flexibility in profit retention and reinvestment. These fiscal efficiencies encourage entrepreneurs to incorporate in anticipation of scale, funding, and long-term tax optimisation, he said.

Also, the digital economy provides a strong commercial pull, Mohan said, adding that e-commerce platforms increasingly favour structured entities for scalability, credibility, and regulatory compliance.