How Uttar Pradesh became India's new business magnet, overtaking Bengal

Over the past year-and-a-half, Uttar Pradesh has witnessed remarkable growth, adding 28,649 active companies

Uttar Pradesh, India’s agrarian powerhouse, has surged past West Bengal to become the third-largest state in terms of ‘active’ or operational companies, according to the latest data from the Ministry of Corporate Affairs. This leap reflects the state’s burgeoning economic environment and enhanced investor confidence. Only Maharashtra, with 338,351 active companies, and Delhi, with 246,361, now surpass Uttar Pradesh, which, as of September 30, recorded 145,009 active companies — 8.2 per cent of the national total — edging out West Bengal, which had 144,348 active companies, reported The Economic Times.

 

Over the past year-and-a-half, Uttar Pradesh has seen remarkable growth, adding 28,649 active companies, second only to Maharashtra. In contrast, West Bengal’s company incorporations rose by just 8,896 over the same period.

 

 

Long-term growth prospects invite investors

 

Analysts attribute Uttar Pradesh’s rapid business expansion to several factors: a strengthened law-and-order climate, a vast consumer base, and targeted efforts to make the state business-friendly. ‘Aggressive investor outreach’ and promising long-term growth prospects have further enhanced the state’s attractiveness for businesses, a state official said. With over 240 million residents, Uttar Pradesh offers investors India’s largest consumer base, drawing from a predominantly working-age population — estimated to be 55-56 per cent according to the 2011 census. The state’s economic growth has also outpaced the national average, sustaining annual rates between 7.5 and 11.4 per cent since FY22.

 

Diversified economic landscape of the state

 

The Ministry of Corporate Affairs categorises ‘active’ companies by excluding entities that have been shut down, are in liquidation, or are in the process of deregistration. Uttar Pradesh’s focus on diversifying its economy from a traditional agrarian base has been crucial, with the state increasingly supporting consumer electronics, information technology, and defence production sectors. Notably, the state has also prioritised a robust startup ecosystem across multiple industries.

 

Uttar Pradesh’s rise in business rankings

 

In the central government’s 2022 ease of doing business rankings, Uttar Pradesh secured the second position, highlighting its commitment to fostering a business-conducive environment. “Uttar Pradesh has implemented sector-specific policies tailored to industries such as food processing, handlooms, electronics, tourism, solar energy, and pharmaceuticals,” said Manmeet Kaur, partner at Karanjawala & Co. 

 

She further noted that the state’s subsidies and financial incentives for micro, small, and medium enterprises and startups have further contributed to the uptick in company registrations.

 

West Bengal sees a higher rate of company closures 

Despite West Bengal’s strong incorporation record, with 242,249 companies registered to date (compared with Uttar Pradesh’s 199,259), the state has seen a significant number of closures. The data show that 94,039 companies in West Bengal have shut down, 1,145 are under liquidation, 456 are dormant, and 2,261 are in the deregistration process. In comparison, Uttar Pradesh has recorded fewer closures, with 52,603 companies closed, 295 under liquidation, 107 dormant, and 1,245 in deregistration.