Entrepreneurship is the buzzword these days. We constantly read about some new startup every other day. Some of the biggest companies we know today; be it Google, Facebook, Amazon, had humble beginnings as a startup just a decade or so ago. However, it would be wrong to assume that entrepreneurship is a modern concept. It has been there since the beginning of human commerce; as entrepreneurship, simply put, refers to the process of starting a business. So why this renewed interest in ‘entrepreneurship’? We don’t hear or read people raving on about marriage or taxes with great enthusiasm and vigor even though these concepts have been around for ages (To be fair, it would be foolish to expect people to be enthusiastic and excited about discussing taxes).
This change in attitude can be attributed to the changing global environment. Whereas at one point of time, the sole objective of one’s career was to join a prestigious company, earn a healthy compensation and secure stability; this is no longer the case. The sky is the limit now. This is especially true in the Indian context. Pre-liberalization, the scope and probability of success as an entrepreneur was severely limited by several factors. Success as a businessman was dependent on licenses, government contacts and overcoming many bureaucratic hurdles associated with the formation and continuation of a business enterprise. The government attitude and policy towards commerce was also not in tune with the ‘entrepreneurial spirit’ as it took a paternalistic stand; with the public sector dominating the economy leaving little room for entrepreneurial ventures, save for few companies, which had already established themselves pre-independence and had the requisite capital and therefore, were able to capture a considerable share of the market. For example, a study conducted by Gujarat State Financial Corporation during 1965-68 revealed that more than two-thirds of institutional loans were for diversification and expansion of existing enterprises. The collateral required to raise capital through loans was very high and thus, entrepreneurs with a great business idea but not the adequate resources did not get the necessary support from institutions which had the ability to grant the required capital.
In 1991, the Indian government liberalized the economy, opening its doors to the global economy and thus, forever changing the landscape of the Indian economy. Indian companies which had become complacent due to government patronage and protection now had to compete with multinational companies which had superior technology and financial strength. In order to survive, Indian companies had to adapt, become more efficient and employ the latest technological and business practices. This proved to be the perfect breeding ground for entrepreneurs who had previously been unable to break into the market and paved the way for the rise of icons like Narayana Murthy who represent a new breed of businessmen whose entrepreneurial spirit have inspired thousands of entrepreneurs to scale new heights.
India has a large growing consumer market and as per the Asian Development Bank, India’s middle class is set to rise from a quarter of a population in 2005 to almost 60% in 2030. According to a recent Ernst and Young report, India ranks high with respect to ease of funding and entrepreneurship culture. However, despite considerable improvements from the pre-liberalization era, India still does not fare well when it comes to tax and regulation, and education and training; but despite these drawbacks, entrepreneurs are optimistic about the future in India (EY report). While India has comparative advantage in human resources, skills, demographic profile (high youth population) and growing domestic demand; it still fares poorly vis-à-vis its business environment. Thus, even though there has been considerable improvement for entrepreneurship to thrive, there is still a lot of work that needs to be done with respect to infrastructure, bureaucratic hurdles, taxes, etc. The role of the government in this aspect cannot be overstated.
Besides the personal satisfaction to be gained out of starting one’s own enterprise and being part of something new, entrepreneurship has implications far beyond that. In modern open economies, the role of entrepreneurship is considered to be far more important than it ever was. It is a generally accepted notion that almost all the new jobs created during the last few decades in the US were due to startups. A recent Mckinsey & Company-Nasscom report estimates that India needs at least 8,000 new businesses to achieve its target of building a US$87 billion IT sector. According to a recent report on entrepreneurship by the Indian Planning Commission,
“India needs to create 1- 1.5 crore jobs per year for the next decade to provide gainful employment to its young population. Accelerating entrepreneurship and business creation is crucial for such large-scale employment generation. Moreover, entrepreneurship tends to be innovation-driven and will also help generate solutions to India’s myriad social problems including high-quality education, affordable health care, clean energy and waste management, and financial inclusion. Entrepreneurship-led economic growth is also more inclusive and typically does not involve exploitation of natural resources. Large Indian businesses – both in the public and private sector – have not generated significant employment in the past few decades and are unlikely to do so in the coming decade or two. Public sector and government employment has declined in the last few years, and is expected to grow very slowly in the coming years. Large private sector firms have also been slow in generating employment, which is unlikely to change due to increasing automation, digitization, and productivity gains. For example, the banking sector in India has recorded almost no employment growth in the last two decades despite multifold growth in its revenue and assets. Agriculture employs nearly a half of India’s work force but employment is likely to decline in this sector, due to improvements in productivity.”
Therefore, it can be clearly seen that the role, importance and potential of entrepreneurship cannot be further stressed and it would not be an exaggeration to say that entrepreneurship is indeed the need of the hour.
The writer is a student at SSCBS, DU. The views expressed are based upon the analysis and research that the writer did on the topic from various books, reports and web articles. The writer regularly writes for Corporate Monks as a research associate. The writer takes personal responsibility for the ownership of the content shared and incase some sources have not been given credit, you can directly mail the writer firstname.lastname@example.org