THE FUTURE OF ENTREPRENEURSHIP IN INDIA
In India, business was traditionally
considered to be the domain of scholarly challenged individuals or the result
of natural inheritance within business communities. Gradually, the appetite for
risk and the acceptance of failure increased, but only recently have alternate
professions and the idea of "following one’s dream" gained approval.
In particular, entrepreneurship caught the fancy of the Indian middle class
after the economy was liberalized. The economic reforms introduced in 1991
reduced the bureaucratic controls, promoted private enterprise, and lowered the
barriers to creating new businesses. Coupled with the emergence of knowledge
economy, the demand for skilled employees greatly increased and a trend emerged
toward technology entrepreneurship in the services sector, which is less
capital-intensive than traditional industries.
Indeed, the future of entrepreneurship
in India lies in the services sector, and the Government of India is providing
support to encourage this trend. However, there are as many challenges as there
are opportunities, as will be discussed below.
Government Support
Traditionally, government programs, and
support from the banking and finance industry, were largely focused and aligned
to the manufacturing sector with its strong product focus. Industry
associations such as the Confederation of Indian Industry (CII),
the Federation of Indian Chambers of Commerce and Industry (FICCI)
and the Associated Chambers of Commerce and Industry of India (ASSOCHAM)
have existed since the pre-independence era and lobby the government for policy
initiatives that favour traditional businesses and industries. With the
information technology sector emerging as a rapidly growing segment of Indian
industry the National Association of Software and Services Companies (NASSCOM)
was formed in 1988 as the industry association for information technology
industry.
In 2000, the National Science &
Technology Entrepreneurship Development Board (NSTEDB) – under the aegis
of the Department of Science and Technology (DST) – launched the
Technology Business Incubation (TBI) program, which is geared towards supporting
entrepreneurship in emerging technology areas such as information and
communications technology, manufacturing, biotechnology, nanotechnology, and
agricultural technology. This program was an extension of the Science &
Technology Entrepreneurs' Park program, which was initiated in 1985 by the
NSTEDB in academic institutions and research labs of excellence with an
objective of promoting self employment for young science and technology
graduates. The NSTEDB identified 120 technology business incubators in
different technology areas within India (NSTEDB, 2009). Of these, 53 were
promoted by the NSTEDB, 40 were software technology parks promoted by the
Ministry of Information and Communication Technology, and the remaining 30 were
promoted by other government departments, banks, financial institutions, or
private companies. The numbers are small for a country as large as India and
the geographical distribution is also not uniform: 56% of incubators are
located in southern India, 21% are in northern India, 17% are in western India,
and only 6% are located in eastern regions (NSTEDB, 2014).
The Government of India promoted and
supported small and medium-sized enterprises (SMEs) in India by establishing
clusters across the country. District Industry Centres were established in all
major cities and towns of India. Cottage industries were established and
promoted through various support programs under the Khadi and Village
Industries Commission. In 2006, the Government of India established the
Ministry of Ministry of Micro, Small & Medium Enterprises (Ministry of
MSME), which provides support in the form of infrastructure
resources, funds, training, and tax benefits.
Besides government initiatives, many
private organizations are helping build the entrepreneurial ecosystem and
related support services. A number of private incubators and accelerators have
entered the field in the past few years, though most of these are located in
the main technology hubs of the country (i.e., Delhi-NCR, Mumbai, Bangalore,
Pune, Hyderabad, Chennai, Kolkata) leaving a lot of scope for penetration to
less prominent cities and towns.
Challenges and Opportunities
Data from the NASSCOM resource centre
paints a clear picture of the emerging startup ecosystem in India (NASSCOM,
2014):
- The number of technology startups has tripled in last six years, from about 1000 to 3000 startups.
- Two-thirds of entrepreneurs are less than 30 years of age.
- Health care, retail, and SMAC (social, mobility, analytics, and cloud) are the hot beds of technology entrepreneurship.
- The number of angel investors has grown from 7 to 32 from 2006 to 2012 while the number of venture capitalists has grown from 43 to 48 in the same period.
Thus, the entrepreneurial journey of an
independent India has only just begun and the road ahead is full of promise,
provided that a favourable ecosystem continues to develop and give wings to
this fledgling trend. There is much to desire in terms of policy reforms and
support system available to entrepreneurs. However, numerous challenges and
related opportunities remain and can be summarized as follows:
- Culture
shift:
India has experienced nearly two centuries of colonial influence followed
by a half century of socialistic policy leanings, and neither of these
contexts favour free private enterprise. The shift to an entrepreneurial
culture is a recent phenomenon, which is yet to transform the traditional
middle-class mindset of business being "the refuge of the incompetent
and the unscrupulous" and of salaried jobs being a secure option in
an uncertain world. This culture is gradually changing with social
acceptance of new alternatives and growing appetites for risk. The shift
to nuclear families and high mobility has also reduced social pressures to
conform. In most areas, the gaps are many and competition is limited,
hence a large opportunity exists for entrepreneurial initiatives.
- Disparity: The
entrepreneurial ecosystem is evolving every day with the birth of new
support agencies (both government and private initiatives) to meet the
growing needs of entrepreneurs; yet, it has a long way to go to address
the needs of a country as large as India. The rapid growth of a support
system is concentrated in certain pockets of urban development centres,
mainly in the technology hubs limited to metropolitan areas and some state
capitals. The distribution of facilities though uneven is fast spreading,
and the benefits of the developing economy are gradually percolating to
the remote geographies and to the demography at "the bottom of the
pyramid" thanks to increased social entrepreneurship. The equitable
distribution of the benefits of economic growth and development has caught
the attention of many socially inclined entrepreneurs. Hopefully, the
glaring disparity in wealth distribution can be made less stark by
providing an even playing field.
- Foreign
influence:
The growth of the Indian economy is service oriented with a heavy
dependence on export. The domestic demand is low due to stagnant primary
and secondary sectors of the economy. A huge spate of economic reforms are
the need of the hour to boost domestic agriculture and the industrial
sector to create indigenous demand for services and to develop the
domestic markets. A heavy dependence on foreign economies makes growth
unstable and vulnerable to external uncertainties. That the need for this
balance is being recognized at different levels and that policy reforms
for promoting the neglected sectors of the economy are being initiated are
good signs. A heavy investment in infrastructure development and
business-friendly regulations being planned to improve the country's
ratings in terms of the ease of doing business and to attract foreign
direct investment and foreign institutional investment, if successfully
implemented, can open doors to new possibilities for entrepreneurs.
- Lack
of success stories: The success of predecessors opens doors for those who
follow. India needs more entrepreneurial success stories to feed on and
motivate the next generation to embrace the difficult but rewarding
entrepreneurial journey. Rags to riches success stories of early Indian
entrepreneurs associated with Infosys, Flipkart, Naukri, Makemytrip,
Biocon, Dr. Reddy's, Red Bus, and the like are giving rise to new hopes
and aspirations in the masses. The blooming SME sector reflects the
strength of a country's economic ecosystem. India needs to recognize and
reward its risk takers and promote entrepreneurs of all hues as the growth
engines of the economy. Having tunnel vision about what success consists
of and what is considered an achievement for an entrepreneur may restrict
the diversity of initiatives. The ecosystem needs to support all segments
of entrepreneurial effort without discrimination or bias for set
categories.
- Social
entrepreneurship: India suffers from inequitable distribution of wealth,
with 42% of its large population living below the international poverty
line of $1.25 USD per day (UNICEF, 2008). Many are still deprived of the
benefits of economic growth and the technology revolution. To achieve
inclusive growth for all economic sections of the society, another trend
is social entrepreneurship, which aims to create enterprises that will
impact the lives at the bottom of demographic pyramid. For example, the
penetration of mobile technology to the remotest geographies and the
lowest economic strata is proving to be the most helpful tool in reaching
out to this segment, and social entrepreneurship funds and incubators are
now available with exclusive focus on this sector. Incubators such as Villgro,
the Rural Technology and Business Incubator (RTBI), Periyar
Technology Business Incubator are exclusively focused in this
area while others such as the Centre for Innovation Incubation and
Entrepreneurship (CIIE) and the Deshpande Foundation are increasing efforts
to identify scalable models in social enterprises. Funds such as Ennovent,
Dasra,
and UnLtd India are trying to systematically
invest in scalable social enterprises. Because there are large gaps in
this sector, the potential and scope for innovation is also high.
- Funding: Although the traditional banking and financial industry has rules and regulations that favour the industrial sector, which is more oriented towards secured debt, new equity-investing arms are coming up in most public and private financial institutions to support the service sector. Private seed and angel funding besides private equity and venture capital funding are fast growing, primarily in funding technology ideas that have a shorter life cycle and rapid scalability potential.
Conclusion
The Indian experience has established
that, when the right environment is created by the policy makers, the
entrepreneurial spirit of the people finds expression and the economic activity
booms. The government and the citizens alike have realized the potential of
private initiatives ever since the Indian economy was liberalized in the 1990s.
The trend of private enterprise is picking up pace in India and is likely to be
supported by all executive and legislative functions of the country
irrespective of political ideologies.
Despite many challenges, the
entrepreneurial opportunities in India are substantial. A new-found
entrepreneurial culture is creating a favourable ecosystem of service and
resource providers. Besides government programs and agencies, a number of
private funds, mentors, and service providers are entering the arena to further
accelerate the trend. There is a long way to go to reach a mature
entrepreneurial landscape in India, but the opportunities are sufficiently
large and numerous that the future of India will likely be shaped by its
entrepreneurs.
References
NASSCOM. 2014. Start-up Ecosystem:
Innovative, Daring, Futuristic. National Association of Software and Services
Companies. August 1, 2014:
http://www.nasscom.in/india-startup-ecosystem
http://www.nasscom.in/india-startup-ecosystem
NSTEDB. 2009. Developing Ecosystem
for Knowledge to Wealth Creation: Technology Business Incubators. New
Delhi: Government of India, Department of Science and Technology, National
Science & Technology Entrepreneurship Development Board (NSTEDB).
NSTEDB. 2014. Fuelling
Entrepreneurship: The Story of Technology Business Incubation in India. New
Delhi: Government of India, Department of Science and Technology, National
Science & Technology Entrepreneurship Development Board (NSTEDB).
UNICEF. 2008. The State of the
World's Children 2009: Maternal and Newborn Health. New York: United
Nations Children's Fund (UNICEF).
Dubey, R. 2014. Q&A. What is the
Future of Entrepreneurship in India?. Technology Innovation Management Review,
4(8): 46-49. http://timreview.ca/article/822