India needs entrepreneurs

By Amit Kapoor

The Narendra Modi government completed one year in office on May 25, 2015. One of the centerpieces of why the BJP-led NDA dispensation came to power was is its focus on development and governance. Development, industrialization and jobs are intrinsically linked to entrepreneurship. The greater the number of entrepreneurs in a society the greater will be the chances of prosperity for the people residing in it. Entrepreneurship is critical as it also leads to innovation, betterment in the quality of life and greater social progress within a society.

While it is worthwhile to notice that the present government has for the first time introduced a Ministry of Entrepreneurship (with Skill Development), the fact remains that India’s record is at best poor at nurturing entrepreneurs and creating an entrepreneurial ecosystem. Can the present government dream of creating the next Silicon Valley? That would require taking stock of the present reality in the entrepreneurial space necessary for betting conditions in the future. India’s position on global indices as well on several other indicators of entrepreneurship at present is alarming. Though the present government is taking steps to better some of these, the approach seems to be piecemeal.

The GEI (Global Entrepreneurship Index 2015) places India at a dismal 104th rank below all the BRICS economies that stood thus (China-61, Russia-70 and Brazil-100). The best-performing country on the Index is unsurprisingly, the US. On the three pillars too which make up the composite index, India performs relatively better on Entrepreneurial Attitude pillar, (95), at an average level on the Entrepreneurial Aspiration pillar (104) and relatively poorly on the Entrepreneurial Ability pillar (107).

Another major study undertaken in 2013, on Indian entrepreneurship is The Global Entrepreneurship Monitor (GEM). It pointed out that the entrepreneurial attitude (particularly on viewing entrepreneurship as a desirable career choice), relatively speaking with other BRICS economies was low in India. Only 61 percent of the adults in the sample (in the age bracket of 18-64) looked at entrepreneurship as a desirable career option. The figure was 70 percent in BRICs economies and 77 percent in factor-driven economies.

Also, the same study used a measure of total TEA - Total Early Stage Entrepreneurial Activity. This is described in the study as the percentage of individuals in the sample age between 18 and 64 years who are in the process of either starting a new business or have recently started one. India performed relatively poorly on this measure in comparison to other BRICS countries, with only Russia behind it.

The data in enterprise surveys from the World Bank reveals an interesting story. The new firm density described by the enterprise surveys as number of new corporations created per 1,000 working age (16-64 years) individuals is found to be dismally low in India.