By Dr Anand Kulkarni
Dr Anand Kulkarni is the Principal Adviser for Planning and Performance at Victoria University.
Entrepreneurship is vital for job creation, economic growth and problem-solving. It also reflects a society’s capacity for boldness, risk-taking and creativity. More specifically, according to the Global Entrepreneurship Development Institute (GEDI), there is a strong positive association between entrepreneurship, economic growth and innovation.
The GEDI has recently released it’s 2018 Global Entrepreneurship Index, a ranking of 137 countries. Countries are ranked on 14 criteria: Opportunity perception (whether the population can identify opportunities to start a business); start-up skills; risk acceptance; networks; cultural support; opportunity start-up (whether entrepreneurs are motivated by opportunity rather than necessity); technology absorption; human capital; competition; product innovation; process innovation; high growth (business intention to grow); internationalisation and risk capital availability.
How does India fare? India’s performance is important given the priority of the “start-up India” initiatives and the crucial role of entrepreneurship in generating jobs in a stagnant Indian labour market.
India’s performance as per the GEDI index
According to GEDI, India is ranked 68th out of 137 countries, a “middling” performance. As per the Asia Pacific region, India is again in the middle position, 14th out of 28 countries. The leading regional players are Australia, Hong Kong and Taiwan at first, second and third positions respectively. It is noteworthy that India falls below China (9th) and more established regional economies such as Korea (4th) and Japan (6th) in the region.
The performance by specific criteria also makes for an interesting viewing. India’s strength areas where its performance is above its overall score, are in product and process innovation, internationalisation, opportunity start-up, risk acceptance, opportunity perception and robust competition in the marketplace. Its performance on human capital is broadly at par with its overall performance.
Where does India score the most?
India’s strongest performance falls under the criterion of product innovation where its score is equal to the best in the world. This measures a country’s ability and potential to generate new products and to adopt or imitate existing products. India, for example, has increasingly developed a reputation for producing “frugal innovation” products which comprise of acceptable performance standards (often aimed at the bottom of the pyramid of consumers) and features but are associated with an extremely low cost for the consumers. Such innovations challenge the usual perceptions about the price and quality in the developed world and build upon India’s strength in improvisation, ingenuity and innovation capabilities.
In broader terms, India’s strength lies in its ability to identify the opportunities and risk-taking, which in turn links to its capabilities in product innovation and a healthy attitude towards internationalisation and seeking new markets beyond the home base.
Reasons for India’s “middling” performance
By contrast, India’s weaker areas, where it scores below the overall score, are in start-up skills, networks and cultural support, technology absorption (by far the weakest), high growth and risk capital availability.
However, the weakest area for India lies in technology absorption which is the ability of a country to access, utilise and enmesh the knowledge from elsewhere and then integrate it. This still suggests a somewhat insular approach to innovation and could also point towards the concerns about investing in technology, technological partnerships, the need to stay abreast about current trends, greater labour market flexibility and a more supportive education and training system.
Some other challenges and influences
Interestingly, India also faces some acute challenges in terms of networking and cultural support. India does not perform at the same standard as a number of other countries do in terms of how well entrepreneurs know and connect with each other to share ideas, technical know-how, market connections and to undertake joint activities. Cultural support is also a key weakness in the Indian set up. This measures how a society views entrepreneurship in terms of its status, as a career choice and how this view is affected by corruption.
The influence of corruption on societal views about entrepreneurship points towards the fact that corruption continues to rear its ugly head in India despite numerous reforms and progress in this area. Also, the perception of Indians about entrepreneurship as a career choice shows that there is still a traditional underlying preference in India for the stable and secure salaried employment as compared to entrepreneurship.
Lastly, surprising is the fact that India does not perform well on the availability of risk capital, despite the various measures that have been put in place under the “start-up India” initiatives. Thus, a critical challenge remains for the entrepreneurial sector in ensuring that the appropriate amount and type of capital is available in an entrepreneurial life cycle, whenever needed.
The future approach
In order to increase its GEDI index ranking significantly, India needs to pay more attention to the skills required for entrepreneurship including staff training, labour market flexibility in terms of being able to hire the right people with the right skills at the right time, and the entrepreneurs’ level of education. There is also a need for improving the capacity of the education system in providing high-quality support including a greater focus on entrepreneurship courses.
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