According to figures available with The Financial Express, between April and October, 1998, only 143 public companies were born, compared with more than 335 during the same period last year. The percentage decline in the number of new public companies set up has touched 70 per cent during the last three months, when 44 firms were formed against 127 last year.

The situation is equally dismal for private companies. During April to October, only 2,571 companies were set up against 4,325 last year. In the last three months, the crash is even more resounding: 875 firms were formed between August and October against 1,737 during the same period last year.

And there is no let-up in the decline. Last month, only 13 public limited companies were registered with the RoC in Mumbai,against 42 registrations in the same month last year. In September this year, 17 public companies and 341 private entities got registration, as against 46 public companies and 595 private companies in the same month last year.

The first suspect in the incorporation disaster is the recession, say analysts, who point out that setting up of new corporates is considered a key parameter for evaluating economic activity.

It is also suggested that over the last 12 months, business has moved into a consolidation phase, eking every extra rupee out of existing assets, and purchasing existing business assets rather than going for greenfield ventures where available as the new means of entry.

Corporate analysts are, however, not unanimous in their pessimism. Says noted chartered accountant Sailesh Haribhakti: "We are currently in a phase of consolidation, and the fall in the number of companies incorporated is a fallout of the process."

ICICI general manager Kalpana Morparia says that this is not necessarilylinked to manufacturing capacities at all, but the reduction is largely in the number of investment corporations set up by corporate groups in the past to channel investments, loans and advances. "These have been discouraged through various means over the last few years, therefore, the number of registrations have come down, this is not really linked to manufacturing," said Morparia.

She pointed out that companies had been concentrating during the last year on consolidation rather than expansion through greenfield projects, since a number of existing projects have come up on the basis of the 1995-96 demand boom, and therefore are saddled with surplus capacity.

Relaxations for investment in group companies have taken away the sop to float a clutch of investment companies (which so long operated merely as shell companies), and promoters are gradually realising the need to consolidate their existing entities, feel experts.

Out of the existing 1.2 lakh-odd companies, as many as 90 per cent are just "shell"companies, and only a handful of around 5,000 entities are traded on stock exchanges, say the experts.

"This is a phase of correction and there may soon come a stage when new registrations will be restricted to performing companies," feel many financial analysts.