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Introduction………………………………………………….. … .....2
Growth of entrepreneurship in
Current scenario of entrepreneurship in India
Scope of entrepreneurship development in India…………………… 11 Conclusion………………………………………………………… 12
“An entrepreneur is one who always searches for change, responds to it and exploits it as an opportunity. Innovation is the basic tool of entrepreneurs, the means by which they exploit change as an opportunity for different business of service.” --Peter Drucker To put it very simply an entrepreneur is someone who perceives opportunity, organizes resources needed for exploiting that opportunity and exploits it. Laptops , mobile phone, Motor Bikes, Credit Cards, Courier Service, and Ready to eat Foods are all examples of entrepreneurial ideas that got converted into products or services.
‘A systematic innovation, which consists in the purposeful and organized search for changes, and it is the systematic analysis of the opportunities such changes might offer for economic and social innovation.’ -- Peter Drucker Entrepreneurship is the practice of starting new organizations or revitalizing mature organizations, particularly new businesses generally in response to identified opportunities. Entrepreneurship is a creative human act involving the mobilization of resources from one level of productive use to a higher level of use. "It is the process by which the individual pursue opportunities without regard to resources currently controlled." Entrepreneurship involves a willingness to take responsibility and ability to put mind to a task and see it through from inception to completion. Another ingredient of entrepreneurship is sensing opportunities, while others see chaos, contradiction, and confusion. Essence of Entrepreneurship is going against time with maturity and serving as a change agent. Entrepreneurship is considered to be a significant determinant of economic development. New entrepreneurial activities play a vital part in the process of creative destruction that fosters innovation, employment, and growth. While India has traditionally been an entrepreneurial country, it fares poorly in numerous global studies exploring the entrepreneurial and business potential of countries but, on the other hand on the most conservative basis, our domestic consumption, in virtually any sector, has the potential to at least double, or treble, from current levels – perhaps, just to catch up with a country like China. Then, there is the entire global opportunity, across diverse sectors internationally, the "Made in India" tag is now an increasingly respected brand, valued for quality, reliability, and competitiveness. Truly, with economic reforms in the country, and with the virtual removal of all trade barriers, the world is now our market and our opportunity. The pursuit of these opportunities requires an indomitable spirit of entrepreneurship. Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail. Entrepreneurial activities are substantially different depending on
the type of organization that is being started. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-time) to major undertakings creating many job opportunities. Many "high-profile" entrepreneurial ventures seek venture capital or angel funding in order to raise capital to build the business. Angel investors generally seek returns of 20-30% and more extensive involvement in the business
GROWTH OF ENTREPRENEURSHIP IN INDIA
The proper understanding of the growth of entrepreneurship of any country would evolve within the context of the economic history of the particular country becomes the subject matter of this section. The growth of entrepreneurship in India is, therefore, presented into two sections viz. • Entrepreneurship during Pre-Independence • Entrepreneurship during Post-Independence ENTREPRENEURSHIP DURING PRE-INDEPENDENCE The evolution of the Indian entrepreneurship can be traced back to even as early as Rigveda, when metal handicrafts existed in the society. This would bring the point home that handicrafts entrepreneurship in India was as old as the human civilization itself, and was nurtured by the craftsman as a part of their duty towards the society. Before India came into contact with west, people were organized in a particular type of economic and social system of the village community. Then, the village community featured the economic scene in India. The Indian towns were mostly religious and aloof from the general life of country. The elaborated cast based diversion of workers consisted of farmers, artisans and religious priests. The majority of the artisans were treated as village servants. Such compact system of village community effectively protecting village artisans from the onslaughts of external competition was one of the important contributing factors to the absence of localization of industry in ancient India. Evidently, organized industrial activity was observable among the India artisans in a few recognizable products in the cities of Banaras, Allahabad, Gaya, Puri & Mirzapur which were established on their river basins. Very possibly this was because the rivers served as a means of transportation facilities. These artisan industries flourished over the period because the Royal patronage was to them to support them. The workshops called ‘kharkhanas’ came into existence. The craftsmen were brought into an association pronounced as ‘guild system’. On the whole, perfection in art, durability beyond doubt and appeal to the eye of the individual were the distinguishing qualities inherent in the Indian craftsmanship that brought much everlasting laurels of name and fame of the illustrious India in the past. To quote, Bengal enjoyed worldwide celebrity for Corah, Lucknow for chintzes, Ahmadabad for dupttas, and dhotis, Nagpur for silk boarded cloth, Kashmir for shawls and Banaras for metal wares. Thus, form the immemorial till the earlier years of the 18th century, India enjoyed the prestigious status of the queen of the international trade with the help of its handicrafts. Unfortunately, so much prestigious Indian handicraft industry, which was basically a cottage and small sector, declined at the end of the 18th century for various reasons. These may be listed as1. Disappearance of the Indian royal courts who patronized the crafts earlier. 2. The lukewarm attitude of the British colonial govt. towards the Indian crafts. 3. Imposition of heavy duties on the imports of the Indian goods in England. 4. Low priced British made goods produce on large scale which reduced the competing capacity of the product of the Indian handicrafts. 5. Development of transport in Indian facilitating the easy access of British product even to far-flung remote part of the country.
6. Changes in the tastes and habits of the Indian, developing craziness of foreign products. 7. Unwillingness of the Indian craftsmen to adapt to the changing tastes and needs of the people. Some scholars hold the view that manufacturing entrepreneurship in India emerged as the latent and manifest consequence of east India company advent in India. The company injected various changes in the Indian economy through export of raw materials and import of finished goods in India. Particularly, the parsis established good rapport with the company and were much influenced by the company’s commercial operations. The company established its first ship building industry in Surat where from 1673 onwards the parsis built vassals for the company. The most important was shipwright Lowjee Nushirvan, who migrated to Bombay around 1935. He belonged to a Wadia family which gave birth to many leading ship-builders of Bombay. In 1677, Manjee Dhanjee was given a contact for building the first large gun powder mill in Bombay for the east-India company. Besides, a Parsi foreman of a gun factory belonging to the company established a steel industry in Bombay in 1852. On the basis of these facts, it can be stated that the east India company made some contribution towards entrepreneurial growth in India. But whether the company did it deliberately for the growth of entrepreneurship in India or it was just a coincident that people came in contact with the company and entered the manufacturing, nothing can be said with certitude. The actual emergenced of manufacturing entrepreneurship can be noticed in the second half of the 19th century. Prior to 1850, some stay failure attempts were, indeed , made by the Europeans to setup factories in India. In the beginning, the Parsis were the founder manufacturing entrepreneurs in India. Ranchodlal chotalal, a Nagar Brahman, was the first Indian to think of setting up the textile manufacturing on the modern factory lines in 1847, but failed. In his second attempt, he succeeded in setting up a textile mill in 1861 at Ahmadabad. But before this, the first cotton textile manufacturing unit was already setup by a Parsi, Cowasjee Nanabhoy Dabar in Bombay in 1854 fallowed by Nawrosjee wadia who open his textile mill in Bombay in 1880. The credit for the expansion of textile industries upto 1915 goes to the Parsis. Out of 96 textile mills existing in 1915, 43% (41) were set up by parsis, 24% (23) by Hindus, 10% (10) By Muslims and 23% (22) by British citizens. Later, the Parsis invaded other fields, mainly iron and steel industry, also Jamshedjee Tata was the first Parsi entrepreneur who established the first steel industry in Jamshedpur in 1911. In the first wave of manufacturing entrepreneurship, except parsis, all others hailed from non-commercial communities. Why the well-known commercial communities, namely, Jains and Vaishyas of Ahmadabad and Baroda, lagged behind in entrepreneurial initiative throughout the nineteenth century can be explained by two factors. Firstly, the improvement of business climate in the countryside during this period results in an increase in the quantum of trade which assumed quick returns on investments. This proves the commercial activity more lucrative during the period, Secondly; it can also be attribute to their conservative attitude to change from commercial entrepreneurship to industrial entrepreneurship. The Swadeshi campaign, i.e., emphasis on indigenous goods, provided, indeed, a proper seedbed for inculcating and developing nationalism in the country. It was the influence of Swadeshi that Jamshedji Tata even named his first mill 'Swadeshi Mill'. The spirit of
indigenousness strengthened its roots so much in the country that the Krishna Mills in its advertisement of Tribune of April 13 made the following appeal: "Our concern is financed by native capital and is under native management throughout"." The second wave of entrepreneurial growth in India began after the First World War. For various reasons, the Indian Government agreed to 'discriminating' protection to certain industries, even requiring that companies receiving its benefits should be registered in India with rupee capital and have a proportion of their directors as Indians. The advantages of these measures were mostly enjoyed by the Indians. The Europeans failed to harness the protectionist policies to their interests." These measures helped in establishing and extending the factory manufacturing in India during the first four decades of the twentieth century. During these decades, the relative importance of Parsis declined and Gujaratis and Marwari Vaishyas gained that pendulum in India's entrepreneurial scene. The emergence of Managing Agency System which made its own contribution to the Indian entrepreneurship can be traced back to 1936 when Carr, Tagore & Co. assumed the management of Calcutta Steam Tug Association. The credit for this initiation goes to an Indian, Dwarkanath Tagore, who encouraged others to form joint-stock companies and invented a distinct method of management in which management remained in the hands of the 'firm' rather than of an 'individual' . Historical evidences also do confirm that after the East India Company lost monopoly in 1813, the European Managing Agency Houses entered business, trade and banking. And, these houses markedly influenced eastern India's Industrial scene. It is stated that the Managing Agency Houses were the real entrepreneur for that period particularly in Eastern India. Brimmer" holds the opinion that Agency Houses emerged to overcome the limitations imposed by a shortage of venture capital and entrepreneurial acumen though all may not agree squarely with this view. Reasons for slow growth of entrepreneurship in During British period in India.
1. Not given proper protection: The enterprises were not given proper protection 2. 3.
4. 5. 6.
by British Government. Discouragement by British Government: Only those industries in which the British Government put their own capital were given encouragement. High railway freight charges: The railway freight charges were higher for locations not nearer to the ports. This proved that the transportation of the goods manufactured for the Indian markets were more expensive than goods meant for exports. Exorbitant tariffs: The British imposed exorbitant tariffs on India made goods. Constantly harassed for getting licenses: Entrepreneurs were constantly harassed for getting licenses and finance to established and run industries. No facilities for technical education: there were almost any facilities for technical education which alone could strength Indian industrial entrepreneurship.
7. Entrepreneurs faced fierce competition from abroad: The Indian indigenous
entrepreneurs faced fairs competition from machine made goods exported to India from abroad. 8. Lack of transportation and communication facilities: Lack of transportation and communication facilities acted as the stumbling blot in the way of industrial growth. 9. Not encouraged the establishment of heavy industries: The British Government did not encourage the establishment of heavy industries like heavy machinery, iron and steel which are necessary for rapid industrialization. 10. Political turmoil: Political turmoil and abolition of princely courts discouraged the growth of entrepreneurship. 11. Multi-currency system: Prevalence of multi currency system affected the business environment and blocked the growth. Inspite of the above problems, the export trade of textile in 17th century was on ascending trend. During this period, grouping of Indian merchants into joint stock associations for the purpose of managing the supply of textiles to European companies was very significant. This helped in exporting huge volume of textiles to the European markets leading to favorable terms of trade.
PARTITION OF UNDIVIDED INDIA ON 15th AUGAST 1947 Before we skip our review of entrepreneurial growth to the post-Independence era, it will be in the fitness of the things to shed some light on effects of partition on India's industrial economy so as to depict Independent India's industrial background. Following are some major effects of partition on 15th August 1947 on the Indian industrial economy:Demographic Effects : 77% of area & 82% of population get remain in India whereas 23% of area & 18% of population converted into Pakistan. Industrial Activity : 90% of total industrial establishment with 93% of industrial workers (Jute, Iron & Steel and Paper industries) in India whereas 10% of total industrial establishments with 7% of industrial workers (Cotton textile, sugar, cement, glass and chemical industries) in Pakistan. Mineral and Natural Resources : 97% of total value of minerals in India in which major deposits of coal, mica, manganese, iron, etc. whereas 3% of total value of minerals with major deposits of Gypsum, rock salt, etc. in Pakistan. Manpower and Manager skill :- India was at loss whereas Muslims possessed these skills who migrated to Pakistan.
Transport Facilities: 83% of total route mileage in India whereas 07% of total road mileage in Pakistan. Major Ports: India lost major ports which adversely affects India’s exports.
(Source: Entrepreneurial Development by S.S. Khanka)
ENTERPRENEURSHIP DURING POST- INDEPENDENCE After taking a long sign of political relief in 1947, the Government of India tried to spell out the priorities to devise a scheme for achieving balanced growth. For this purpose, the Government came forward with the first Industrial Policy, 1948 which was revised from time to time." The Government in her various industrial policy statements identified the responsibility of the State to promote, assist and develop industries in the national interest. It also explicitly recognised the vital role of the private sector in accelerating industrial development and, for this, enough field was reserved for the private sector. The Government took three important measures in her industrial resolutions:(i) to maintain a proper distribution of economic power between private and public sector; (ii) to encourage the tempo of industrialisation by spreading entrepreneurship from the existing centres to other cities, towns and villages, and (iii) to disseminate the entrepreneurship acumen concentrated in a few dominant communities to a large number of industrially potential people of varied social strata. To achieve these adumberated objectives, the Government accorded emphasis on the development of small-scale industries in the country. Particularly since the Third Five Year Plan, the Government started to provide various incentives and concessions in the form of capital, technical know-how, markets and land to the potential entrepreneurs to establish industries in the industrially potential areas to remove the regional imbalances in development. This was, indeed, a major step taken by the Government to initiate interested people of varied social strata to enter the small-scale manufacturing field. Several institutions like Directorate of Industries, Financial Corporations, Small-Scale
Industries Corporations and Small Industries Service Institute were also established by the Government to facilitate the new entrepreneurs in setting up their enterprises. Expectedly, the small-scale units emerged very rapidly in India witnessing a tremendous increase in their number from 121,619 in 1966 to 190,727 in 1970 registering an increase of 17,000 units per year during the period under reference. The recapitulation of review of literature regarding entrepreneurial growth in India, thus, leads us to conclude that prior to 1850, the manufacturing entrepreneurship was negligible lying dormant in artisans. The artisan entrepreneurship could not develop mainly due to inadequate infrastructure and lukewarm attitude of the colonial political structure to the entrepreneurial function. The East India Company, the Managing Agency Houses and various socio-political movements like Swadeshi campaign provided, one way or the other, proper seedbed for the emergence of the manufacturing entrepreneurship from 1850 onwards. The wave of entrepreneurial growth gained sufficient momentum after the Second World War. Since then the entrepreneurs have increased rapidly in numbers in the country. Particularly, since the Third Five Year Plan, small entrepreneurs have experienced tremendous increase in their numbers. But, they lacked entrepreneurial ability, however. The fact remains that even the small entrepreneurship continued to be dominated by business communities though at some places new groups of entrepreneurs too emerged. Also, there are examples that some entrepreneurs grew from small to medium-scale and from medium to large-scale manufacturing units during the period. The family entrepreneurship units like Tata, Birla, Mafatlal, Dalmia, Kirloskar and others grew beyond the normally expected size and also established new frontiers in business in this period. Notwithstanding, all this happened without the diversification of the entrepreneurial base so far as its socio -economic ramification is concerned. “Liberalization was catalyst for growth of Entrepreneurship in India” “Post-liberalization, entrepreneurship has generally increased in India,” Dr Mani told Business Line. And knowledge-intensive entrepreneurship in sectors such as IT and biotechnology has also increased since the economic liberalization process started in 1991, he added. The number of new companies formed during the 1980-2006 period points to a possible growth in entrepreneurship. Figures from the Ministry of Corporate Affairs show that from 1980 to 1991, the average number of companies formed each year was 14,379, while from 1992 to 2006, the average number of companies formed per year was 33,835. According to the paper, liberalisation itself kick-started the growth of entrepreneurship in India for it presented businesses in the country with new market opportunities. Liberalisation also reduced entry barriers for new entrepreneurs as it dispensed with or reduced regulatory measures such as industrial licensing. Similarly, improved availability of financial support from both official and private sources boosted the growth of entrepreneurship. However, entrepreneurship in India could have grown much faster if the capital market had been strengthened to support the system.
Even today, the capital market is not a major source of finance for enterprises, which mostly rely on internal sources of funding or debt. A study of 588 start-ups that participated in a competition conducted recently by National Entrepreneurship Network revealed that 70 per cent relied on personal savings for initial funding, he pointed out. Government-supported and public-private partnership ventures such as the National Science and Technology Entrepreneurship Development Board, Technopreneur Promotion Programme and business incubators in colleges and technology parks also facilitated the growth of entrepreneurship in India. Simultaneously, private sector initiatives such as The Indus Entrepreneurs and National Entrepreneurship Network also supported India’s knowledge-intensive enterprises. The increased availability of technically trained people and programmes that offered formal training in entrepreneurship also bolstered the growth of entrepreneurship.
CURRENT SCENARIO OF ENTREPRENEURSHIP IN INDIA
According to the Global Entrepreneurship Monitor (2007) report, India’s High-Growth Expectation Early-Stage Entrepreneurship (HEA) rate is only one-fifth of that of China. Further, among medium and low income countries, while China’s nascent and new entrepreneurs appear to be the most growth-oriented, with more than 10 per cent of them anticipating high growth. Early-stage entrepreneurial activity in India is marked by low levels of growth expectation. This is despite the extremely high levels of potential entrepreneurial activity as perceived by the non-entrepreneurially active population in the country. While data on entrepreneurship is hard to come by, the following numbers are telling. According to the NSS 62nd round, in rural India, almost 50 per cent of all workers are self-employed – 57 per cent among males and nearly 62 per cent among females, while the corresponding figures in urban India are 42 for males and 44 for females. The NSSO defines a self-employed person as one who has worked in household enterprises as own-account worker; worked in household enterprises as an employer or worked in household enterprises as helper. The essential feature of the selfemployed is that they have autonomy (decide how, where and when to produce) and economic independence (in respect of choice of market, scale of operation and finance) for carrying out their operation. According to the 5th Economic Census conducted by the Central Statistical Organisation (CSO), there are 41.83 million establishments in the country engaged in different economic activities other than crop production and plantation. Five states viz. Tamil Nadu (10.60 per cent), Maharashtra (10.10 per cent), West Bengal (10.05 per cent), Uttar Pradesh (9.61 per cent) and Andhra Pradesh (9.56 per cent) together account for about 50 percent of the total establishments in the country. The same five states also have the combined share of about 50 per cent of total employment.
Issues in the Current Framework
Finance: Access to credit is considered to be one of the key problems faced by entrepreneurs in India. This problem is particularly acute at the start-up stage, where bank finance is hard to obtain. Despite new sources of finance such as venture capital, angel funding and private equity becoming increasingly popular, institutional finance is still not able to meet the current entrepreneurial demands. Regulation and governance: An entrepreneur has to deal with a host of regulatory and compliance issues. These include registering one’s business, obtaining government clearances and licenses, paying taxes and complying with labour regulations. Cumbersome paperwork, long delays and red tapism involved in such transactions create unnecessary burdens for entrepreneurs, constraining their productivity and their ability to do business. As seen in the Doing Business 2008 rankings, India performs poorly in these indicators. A study investigating the effect of regulation on entrepreneurship using the GEM dataset shows India to be having one of the worst regulatory indices. Moreover, lack of clarity on information relating to legal and
procedural aspects of starting an enterprise, as well as those relating to clearances, licenses and government schemes further aggravates the problem.
India’s Ranking in Doing Business 2008
Starting a Business -111 Dealing with Licenses -134 Employing Workers -85 Registering Property -112 Paying Taxes -165 Trading Across Borders- 79 Enforcing Contracts -177 Closing a Business -137
(Source: Doing Business, World Bank,
Manpower: Availability of skilled manpower is another crucial issue for entrepreneurs. For example, in a survey of entrepreneurs conducted by KPMG and TiE in 2008, skilled manpower emerged as the second most important factor for fostering entrepreneurial growth. Further parameters reflecting labour market efficiency and flexibility are dismal. In the Global Competitiveness Index, India ranks 102nd in hiring and f ring practices and 85th in employing workers in the Doing Business 2008 report. Infrastructure: India’s physical infrastructure – roads, rail, ports, power, and telecom – is also considered to be a bottleneck to the smooth operation of entrepreneurial activity. The high transport and supply chain costs that poor infrastructure entails can be affect competitiveness to a great extent, particularly for a small and medium enterprise. Enterprises surveyed in the Global Competitiveness Report 2007-08, rated inadequate infrastructure as ‘the most problematic factor’ for doing business in India. Education: While the influence of education on entrepreneurship is considered debatable, increasingly education is being seen as part of the larger ecosystem that impacts entreprene-urship and entrepreneurial motivations. Greater practical exposure, critical analysis, entrepreneurship curriculum, incubation and mentoring, industry-research linkages can help in fostering entrepreneurship.
SCOPE OF ENTREPRENEURSHIP DEVELOPMENT IN INDIA
In India there is a dearth of quality people in industry, which demands high level of entrepreneurship development programme through out the country for the growth of Indian economy. The scope of entrepreneurship development in country like India is tremendous. Especially since there is widespread concern that the acceleration in GDP growth in the post reforms period has not been accompanied by a commensurate expansion in employment. Results of the 57th round of the National Sample Survey Organization (NSSO) show that unemployment figures in 2003-04 were as high as 8.9 million. Incidentally, one million more Indian joined the rank of the unemployed between 200506 & 2007-08. The rising unemployment rate (9.2% 2008 est.) in India has resulted in growing frustration among the youth. In addition there is always problem of underemployment. As a result, increasing the entrepreneurial activities in the country is the only solace. Incidentally, both the reports prepared by Planning Commission to generate employment opportunities for 10 crore people over the next ten years have strongly recommended self-employment as a way-out for teaming unemployed youth. We have all the requisite technical and knowledge base to take up the entrepreneurial challenge. The success of Indian entrepreneurs in Silicon Valley is evident as proof. The only thing that is lacking is confidence and mental preparation. We are more of a reactive kind of a people. We need to get out of this and become more proactive. What is more important than the skill and knowledge base is the courage to take the plunge. Our problem is we do not stretch ourselves. However, it is appreciative that the current generations of youth do not have hang-ups about the previous legacy and are willing to experiment. These are the people who will bring about entrepreneurship in India. At present, there are various organizations at the country level & state level offering support to entrepreneurs in various ways. The Govt. of India & various State Governments have been implementing various schemes & programmes aimed at nurturing entrepreneurship over last four decades. For example, MCED in Maharashtra provides systematic training, dissemination of the information & data regarding all aspects of entrepreneurship & conducting research in entrepreneurship. Then there are various Govt. sponsored scheme for the budding entrepreneurs. Recognizing the importance of the entrepreneur development in economic growth & employment generation, Maharashtra Economic Development Council (MEDC) has identified entrepreneurial development as the one of the focus area for Council activities two years ago. Various Chambers of Commerce & apex institutions have started organizing seminars & workshops to promote entrepreneurship. Incidentally, various management colleges have incorporated entrepreneurship as part of their curriculum. This is indeed a good development. This shows the commitment of the Govt. & the various organizations towards developing entrepreneurial qualities in the individuals.
There are ample opportunities in small businesses in India and such opportunities will transform India in the coming future. For such transformation to happen there needs to be support both at the governmental and societal level. For the government it is important to realize that the goal of small business owners will be to remain selfemployed. Such people may not need financial assistance but they will need marketing and legal assistance in order to sustain themselves. Practical and cost effective programs need to be developed to address their needs because self-employed people will represent an important segment in economic revitalization. Entrepreneurship development is the key factor to fight against unemployment, poverty and to prepare ourselves for globalization in order to achieve overall Indian economic-progress.
1. Entrepreneurial Development by S.S. Khanka 2. Dynamics of Entrepreneurial Development and Management Millennium
Edition by Vasant Desai
4. http://knowledgeportal.in/ 5. http://dobato.blogspot.com/2006/02/scope-of-entrepreneurshipdevelopment.html 6. http://www.thehindubusinessline.com/
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