By Dr Anand Kulkarni
The Modi government has given considerable attention to the unlocking of India’s entrepreneurial impulses. The Startup India initiatives, along with improvements in the general competitive environment for business, are hallmarks of the present Indian Government. The goal is to drive improvement in performance and facilitate investment and innovation in India.
The latest Global Entrepreneurship Monitor (GEM) provides survey data for 64 countries on key variables such as entrepreneurial activity, motivation, skills and capabilities. It also includes data for the gender distribution of entrepreneurship, the impact of entrepreneurship in terms of jobs and innovation, and the societal value placed on entrepreneurship.
GEM’s verdict on India
According to GEM, the total early stage entrepreneurial activity in India, calculated by the proportion of 18-64 year-olds who are starting a business or are the owner-managers of a new business, stands at 10.6%. Among the BRICS countries, this is at par with China (10.3%) and ahead of Russia (6.3%) and South Africa (6.9%), but behind Brazil (19.6%). Globally, India is ranked as the 31st out of 64 countries on this measure. Software startups in the emerging fields of biotechnology, media and entertainment, and business services are the key drivers of entrepreneurship. But, India might be facing a sustainability issue. The established business ownership rate stands at 4.6%- considerably less than the early stage entrepreneurial activity rate. While the business churn is an inevitable feature of economies, it is critical for any economy to grow and expand by retaining the viability of entrepreneurs over long terms.
Perceptions about Indian entrepreneurship generally put it as “middling” in areas of opportunity spotting and fear of failure. However, they are seen to be weak in perceived entrepreneurial capabilities (e.g the required skills and knowledge to start a business), and entrepreneurial intentions (the intention to start a business within the next three years). India is ranked towards the lower end of the spectrum on opportunity based motivations for entrepreneurship. It stands at the 51st place. This implies that Indians tend to view entrepreneurship in a somewhat defensive manner. Perhaps, as an option in the event of not securing paid employment, rather than as a first choice.
Identified shortfalls in Indian entrepreneurship
Indian entrepreneurs, by and large, do not see themselves creating jobs in the next five years. This is an issue of some concern as India seeks to provide meaningful and plentiful jobs for its large and young labour force. It also reflects the more defensive approach to entrepreneurship. However, in contrast, Indian entrepreneurs are fairly innovative in terms of introducing new products to the market. India is ranked 25th out of 64 on this criterion.
GEM also found that Indians generally did not rate entrepreneurs very highly. In the international arena, India is ranked second last for High Status accorded to entrepreneurs and weak in Entrepreneurship as a good career choice. It seems that the mindset is still quite oriented towards traditional patterns of acquiring qualifications and climbing the corporate ladder. However, this is expected to change as the “gig” economy and the “uberisation” of India intensifies. Indias young age profile needs to work towards fostering an altered mindset about the value of entrepreneurship.
Much like the overall labour market picture in India, female entrepreneurship lags behind males, with the ratio of female to male entrepreneurs being 0.56. This puts India at the 43rd rank out of 64 countries. Among the BRICS countries, it stands behind China (0.73), South Africa (.74), Brazil (1.04), and the Russian Federation (0.83).
Encouragement to move forward
The Global Entrepreneurship Monitor also surveyed experts to assess the overall ecosystem for entrepreneurship. This chiefly features government policy settings, including regulatory policies, entrepreneurial education and the like. Interestingly, and encouragingly, India performs strongly on access to entrepreneurial finance, the support and relevance of general government initiatives, entrepreneurial education at the school stage, and internal market entry for new businesses. Areas which require attention and improvement include physical, commercial, and legal infrastructure, taxes and bureaucracy, and some specific government entrepreneurship programs.
Overall, it appears that India is on the right track. Critical areas that need attention are the encouragement of entrepreneurship as a strong career choice, a change in defensive mindsets, strengthening of the job creation capacity of businesses, and encouragement to females to be more involved in setting up and expanding their own businesses. This, in turn, could be linked to new growth areas in the economy such as green industries. In addition to these improvements and reforms, the old hoary chestnut of government red tape and infrastructure gaps remains a pressing priority.
Dr Anand Kulkarni is a Consultant and the Principal Adviser for Victoria University, Australia. He is a Fellow at the Centre for Policy Development. The views expressed here are those of the author.
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