Corporate Sector booms while India wilts during Covid Pandemic

Covid impact on India’s corporate sector

The halting recovery of the Indian economy from the Covid pandemic received an unexpected blow from the Ukraine war. India’s corporate world is now struggling to cope with this double-trouble that has become a new challenge. This two part series let traces how the Indian corporate sector[1] fared through the pandemic. 

Before that, a brief summary of some macro-economic indicators on Indian economy would help in contextualizing the corporate performance.

In the first pandemic year of 2020–21, India’s GDP shrank by 6.6% as as compared to growth of 3.7 per cent during 2019-20[2]. In the second pandemic year of 2021-22, the growth in GDP was 8.7%.

In other words, after two years of Covid, even by March 2022, the Indian economy could not yet catch up with the 2019 GDP growth level of 4%, after adjusting for the contraction in 2020–21. The performance of the corporate sector needs to be seen in the backdrop of such an overall scenario of the Indian economy over the first two pandemic years.

Corporate Sector booms while India wilts during Covid Pandemic

India’s big corporate sector seems to have made tons of money while the country’s economy as a whole suffered immensely along with millions of ordinary citizens. Smaller companies seem to have taken a hit and many have been forced close down, throwing thousands of workers out of jobs

The most well known instance of course is that of the two top tycoons Ambani and Adani who have both added billions of dollars to their wealth in 2021 alone, when the Covid crisis was at its peak in India.  For example, Gautam Adani added USD 49 billion to his wealth last year – more than the net addition of wealth by the top three global billionaires Elon Musk, Jeff Bezos and Bernard Arnault, according to the 2022 M3M Hurun Global Rich List[3]. The wealth of Mukesh Ambani of Reliance Industries also increased by 24 per cent during the same period taking his overall wealth to  USD 103 billion.

COVID Response Watch LogoThe rest of the big Indian corporate sector also has done quite well during Covid, over the last two years. Despite a 4.2% decline in sales in 2020 and 4.4% decline in the value of production from, the net profits of 3049 top listed companies increased from Rs.1,15,203 crore in 2020to 2,50,460 crore in ­­2021.

In other words, the total net profit of the Indian corporate sector more than doubled in the first pandemic year of 2020–21. The main reasons for this are the fall in the cost of raw materials, power, and fuel as well as in the labour cost.

Covering a larger number of 5270 companies unlike 3049 companies covered in the RBI data, the Center for Monitoring the Indian Economy (CMIE) finds that during the pandemic year these 5270 listed companies logged in a net profit of Rs 5.6 lakh crore, which is 44 percent higher than its previous historical peak in 2013.

Accounting for all incorporated 28,386 companies, including unlisted companies, the CMIE found that while their total income had shrunk by 1 percent in 2020, their net profit increased by 131 percent. Total net profit of these companies stood at Rs 7.5 lakh crore, 79 percent higher than their previous peak of Rs 4.19 lakh crore in 2016.

The pandemic, in fact, has thus come as a bonanza for the Indian corporate sector, especially for the big companies. Nevertheless, the pandemic has taken its toll on numerous smaller companies as well, which is substantial.

Pandemic eats up many Indian companies

As per the data given by Minister of State for Corporate Affairs Rao Inderjit Singh in a written reply in the Lok Sabha on 29 November 2021, 14,624 companies had closed down during the fiscal year of 2020–21, which was also the first pandemic year. Surprisingly, this was a very small number compared to the company closures in fiscal 2017-18 and 2018–19 in the wake of demonetization of 8 November 2016 and introduction of GST from 1 July 2017. 2,36,262 companies were closed down in 2017 and 1,43,233 companies in 2018[4].

Earlier, the Modi Government started pruning the list of registered companies from 1 April 2016, eliminating non-functional companies and shell companies. Starting from April 1, 2016, a total of 5,00,506 “companies” were shut down—mostly shell companies and non-functional ones. During the same time, 7,17,049 new companies were registered under the Companies Act, 2013. Even after accounting for such pruning, the number of companies closed in the cyclical downturn (slowdown) in 2019–20 at 70,972 far outnumbered the companies closed due to the pandemic in the next two years.

How many of these were listed companies? The CMIE has estimated that 1780 listed companies had closed down during the two years of the pandemic. CMIE arrived at this figure from the data available on the Ministry of Corporate Affairs website. The Prowess database of CMIE, hosted on the website of the Ministry of Corporate Affairs, contained the financial statements of 28,462 companies in 2020-21. However, the website did not have the financial statements of 1,780 companies as on April 9, 2022. CMIE thus concluded that these 1780 companies might have closed down since the first year of the pandemic when the financial stress caused by the pandemic would have come into play with full force.

CMIE’s own figure of possible number of all closed companies including all incorporated companies and not just the listed companies was slightly on the higher side at 2422. CMIE’s latest ‘Annual Financials of All Companies’ datasheet gives a summary of 25,665 companies in FY20, based on the mandatory financial statements the incorporated companies are supposed to file with the Corporate Affairs Ministry, but only for 23,243 companies in FY21.

This implies that 2422 companies had not filed their financial reports, hinting at the possibility of these companies having gone out of business. The data on market capitalization of all these 2422 companies are not available separately on the Ministry site or with the CMIE and we can only guess that it might be substantial.

Anyway, whatever was the extent of dent the pandemic caused on the Indian corporate sector was due to the loss of employment and income among the workers which reflected in the shrinkage of the aggregate demand.

Contraction in the aggregate demand

The aggregate demand, especially its consumption demand component, is a key determinant of the performance of the corporate sector, especially on the sales front.

The Economic Survey 2021—22 showed while the share of total consumption declined from 71.7% of the nominal GDP in 2019 to 71.1% in 2020 and further down to 69.7% in 2021, the private consumption declined from 80.5% in 2019 to 58.6% of the GDP in 2020 and further down to 57.5% in 2021. The government consumption however increased from 11.2% of the GDP in 2019 to 12.5% in 2020 and then came down to 12.2% in 2021.

Thanks to massive increase in the public investment in the infrastructure, the Gross Fixed Capital Formation in the economy went up from 28.8% of the GDP 2019 to 29.6% in 2021. Though this could have created some demand for capital goods from the corporate sector, it could not have made up for the decline in the demand for consumer goods—especially, fast-moving consumer goods (FMCGs)—which came down by 2 percentage points of the GDP, which is sizeable. Such a reduction in the aggregate demand hurting the sales of the companies was because of the unprecedented decline in employment and mind-blowing decline in incomes during the first two pandemic years.

The historic job-losses due to the pandemic

While nearly 413 million people were employed (covering both wage-employment and self-employment) in India in 2016, thanks to the economic slowdown the figure had already come down to just around 409 million on the eve of the pandemic in 2019. The number of employed crashed to 387 million in 2020, the first pandemic year, before recovering to 402 million in 2021, the second pandemic year as per CMIE (see Figure 1). In other words, the peak pandemic year of 2020 took a toll of 2.2 crore jobs and despite the recovery in the economy even now the employment has not touched the pre-pandemic level. This cannot but have a crippling impact on the performance of the corporate sector.

Figure 1: CMIE Data on Unemployment


Unprecedented loss in income due to the pandemic

A Pew Research survey showed that around 75 million people in India had witnessed downward mobility in income during the pandemic year of 2020 (See Figure 2).

Figure 2: Estimated change in the number of people in each income tier in India due to pandemic-triggered recession in 2020 (in millions)


Hence, the affluent and middle class markets for the corporate sector, especially automobiles and FMCGs, contracted. This brought down the aggregate sales of the companies but, strangely enough, not their profits.

In the next part of this article we will explore the impact of the pandemic on some select key sectors of the economy dominated by the corporate sector and trace the impact of the pandemic on different corporate trends.

B.Sivaraman is a researcher based Allahabad

[1] There is no uniform definition of Indian corporate sector and count of the number of companies that comprise it also varies as per different estimates.

As per a report of the Ministry of Corporate Affairs (the 7th Annual Report for the year ending 31 March 2021 on the Working of the Companies Act, 2013), as of January 2022, there were 13,44,857 active registered companies in India.

As per the Recepts Budget of the Union Budget 2022—23, the Income-tax Department had received 917,494 corporate returns electronically up to 31 May 2021 for the financial year 2019-20 [i.e. assessment year 2020-21]. Every company is required to file its return of income electronically.

CMIE’s Prowess IQ Database lists the financial performance of 52,229 licensed/registered companies. Almost half of them are unincorporated companies like partnership firms, limited liability companies, cooperative companies, trust companies, and unincorporated non-profits etc.

As far as incorporated companies, the CMIE’s ‘Annual Financials of All Companies’ datasheet gives a summary of 25,665 companies in FY20 and 23,243 companies in FY21. These are incorporated companies but not all of them are listed companies, i.e., public limited companies listed in the BSE or NSE stock exchanges.

Such listed companies numbered 3332, 3383, and 3402 companies by the end of 1st, 2nd and 3rd quarters of fiscal year 2021–22 in the CMIE datasheet on Quarterly Financials of the Listed companies.

Often, by corporate sector, we refer to these listed companies and where for some parameters we reproduce the data available all incorporated companies we indicate that.



[4] See Minister of State for Corporate Affair Rao Birendra Singh’s reply in the Lok Sabha on 29 November 2021 available at


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