Examining why we should be Fostering Entrepreneurship in India

In India we need to create a breed of entrepreneurs who look forward to a strenuous path of research and development in new unexplored areas. Although Indian entrepreneurs have been successful in creating employable manpower but it was much easy in creating or utilizing an opportunity in IT industry, and the growth cycles are slow in other sectors and much varied as compared. These entrepreneurs have been largely benefited with the change of opportunities that came on their way as part of economic growth. Hence this eco system needs to be developed and recognized socially, economically and nationally.

India by fostering entrepreneurial activity can generate additional economic growth within it. To pursue this further, India must now provide opportunities for (1) Education directed specifically at entrepreneurial skills, (2) Financing of entrepreneurial efforts, and (3) Networking among potential entrepreneurs and their experienced counterparts. Even though the Indian government has established policies to support the entrepreneurial activities and efforts, its overall role should be minimized so that the influence of the free market and individual self-interest can be fully utilized for the economic growth. So our research finding explores the brief and concise overview of how entrepreneurship is fostering India and the need, demand and importance. By which we can explore implementation of the entrepreneurship in favor of India`s fast Economic development.

INTRODUCTION

The driving forces behind any economy are the Entrepreneurs. They create large organizations out of backyard enterprises. These were the people, J.R.D Tata, Dhirubhai Ambani, Narayan Murthy, Henry ford and Bill Gates who envisioned a dream and took a risk to achieve their Dream. They marched on a different path to achieve their dreams; Theses people were the innovators, inventors, and adventurers. Entrepreneurship is a social phenomenon and it is not inherent within a person, rather it exists in the interaction between people. To become a successful Entrepreneur we need to practice as a manager by acquiring various skills and efforts in learning and understanding a business. A person may not have the entrepreneur qualities and may not be interested in the same field even though he is from a business family. This reflects a ray of hope for the unemployed to earn a living and maintain a dignified life and also in return helps the economic development of our country. To identify a potential entrepreneur is always a difficult task so the government and other service organizations conduct a special program namely Entrepreneurship Development Program (EDP) whose main purpose is to identify and develop the potential entrepreneurs. The future of the modern society is Entrepreneurship and it is an occupational enterprise which undertakes at an individual level and often involves in financial risk, quick decision making, adaptation of innovative ideas, continuous investment and above all a mindset for organizing things which lead to profit making and development. History of entrepreneurship in India goes back to the period of industrialization which was brought about by the British Raj. And the present education system in India has not been successful in promoting the independent thinking, creativity, a spirit of innovation and motivation for setting up of challenges and achievable goals. Even though the environment and the policies offer a diverse opportunity for sustainable self-employment and ensure contribution of workforce to industrial economy. There is a need to inculcate the spirit of enterprise into the psyche of the present generation.  With all the socio economic development going towards, the entrepreneurial culture has not set in. Hence this paper will identify those aspects and the challenges which will help in fostering the climate of entrepreneurship.

2. Entrepreneurs in India

Who is an Entrepreneur?

Entrepreneur is a loanword from the French language which refers to a person who undertakes and operates a new venture, and assumes some accountability for the inherent risks.

Entrepreneurs build companies which are specifically crafted to exploit a particular opportunity. This provides them an advantage over the older companies that were designed in response to challenges of the past and must change to adapt the today’s requirements. Entrepreneurs can build new companies. They can also rejuvenate existing companies via buyouts and turnarounds. They can also build new companies inside existing companies, which can be called corporate entrepreneurship.

Many “high-profile” entrepreneurial ventures seek venture capital or angel funding in order to raise capital to build the business. Many kinds of organizations now exist to support would-be entrepreneurs, including specialized government agencies, business incubators, science parks, and some NGOs.

In India…

According to Global Entrepreneurship Monitor (GEM) project India Report 2001, Due to social rigidities, Indian women are half as likely as men to be entrepreneurs. Younger, moderately educated, and reasonably well-off people are more likely to be entrepreneurs. The types of startups encountered (established within the last 42 months) were mostly consumer-oriented, comprising of trading activities; most have just about a handful of employees. Main sources of funds in decreasing order were personal, financial institutions, close family members, and government programs.

The wheels of India’s bureaucracy still turn too slow for entrepreneurs, the educational system is not good at promoting entrepreneurial skills and attitudes, Indian institutes have not been as good as multinationals in R&D transfer, and India’s physical infrastructure ranks lowest among the countries surveyed in the report – all prime areas for study and improvement by policymakers, academics and business leaders.

Is India a right place to start a startup?

Following are few interesting observations:

1. People: India is a land of technologists. It is the best place for techies with similar interests to combine their skills and innovate than in any other countries.

2. Funding: Indian startups can survive for much longer time than in any other countries looking at the limited amount of cash requirement for running business here.

Does India lack Entrepreneurship skills? India Venture Challenge organized by The Draper Fisher Jurvetson (DFJ) and TiE (The Indus Entrepreneurs) met with a stupendous response and saw participation of 125 budding and aspiring entrepreneurial teams from across India, representing both new ventures and existing early stage businesses.

According to Tim Draper, Founder and Managing Director of DFJ, “Entrepreneurial talent abounds in India and needs the right atmosphere and encouragement for the skills to be honed and met with success.”

THE GROWTH OF ENTREPRENEURSHIP IN INDIA

Through unrecognized by policy statements, entrepreneurial initiative was breaking new grounds in the small industry scene over the past four decades banking mainly upon the ingenuity and determination of individuals. The late sixties and early seventies also witnessed a few sporadic attempts to create entrepreneurs from non traditional communities with a view to breaking the monopoly of the dominant groups and diversifying the entrepreneurial base in the country. The state of Gujarat was the forefront of this movement.

By the late sixties it became quite evident that two resources are the most critical (inspite of favourable policies) for development of entrepreneurship, finance (credit) and managerial capabilities. The industrial policy exercises were woefully oblivion of these two basic factors though there were incentives and special institutions. When industrial development picked up in the sixties the bankers limited credit mainly to established industrialists and merchants for existing projects with assured success and sufficient collaterals.

The task next was to identify and groom potential new entrepreneurs from a variety of socioeconomic backgrounds. The entrepreneurship development programme with well ell designed inputs for motivating, informing and skilling entrepreneurial individuals was pioneered in 1970. Something started as an experiment soon spread to other parts of the country (and now to many developing countries) and became a deeply entrenched strategy for new enterprise creation over the years. Difficult models and methodologies have been evolved and tasted by different organizations. Several modifications have been carried out to suit the profile and needs of various groups of trainees.

India needs Entrepreneurs

India needs entrepreneurs. It needs them for two reasons: to capitalise on new opportunities and to create wealth and new jobs. A recent McKinsey & Company-Nasscom report estimates that India needs at least 8,000 new businesses to achieve its target of building a $ 87 billion IT sector by 2008. Similarly, in the next 10 years, 110-130 million Indian citizens will be searching for jobs, including 80-100 million looking for their first jobs; that are seven times Australia’s population. This does not include disguised unemployment of over 50% among the 230 million employed in rural India.

Since traditional large employers – including the government and the old economy players – may find it difficult to sustain this level of employment in the future, it is entrepreneurs who will create these new jobs and opportunities.

Fortunately, today’s knowledge-based economy is fertile ground for entrepreneurs in India. The success stories of businesses built on a great idea executed by a talented team have great appeal in India, where access to capital is scarce and regulation has often created barriers to success. And young Indians have a dream: to be the next Sabeer Bhatia of India. Estimates indicate that several thousand “new economy” businesses were launched last year in India. This is not just a “big-town” phenomenon. For example, when McKinsey & Company launched India Venture 2000, a business plan competition to catalyse entrepreneurship in India, many of the 4,500 teams that participated were from small towns such as Meerut, Siliguri, Warangal and Pollachi.

I believe India has an extraordinary talent pool with virtually limitless potential to become entrepreneurs. India must, however, commit to creating the right environment to develop successful business builders. To do this, I believe India must focus on four areas.

Create the right environment for success:

Ensure that entrepreneurs have access to the right skills:

Ensure that entrepreneurs have access to “smart” capital:

Enable networking and exchange:

THE TRANSFORMING SCENERIO

While training can provide the necessary skills and motivation to entrepreneurial individuals, it is the government that should create an encouraging environment so that creative individuals commercialize their innovative ideas. In other words, the spirit of enterprise comes directly in contact with the ‘system’ at the stage of launching a business venture. Unfortunately, enquiries among entrepreneurs time and again reiterate the negative impact of the system on the morale of the entrepreneur and the growth of enterprise. Unfriendly bankers, procedural delays, bureaucratic indifferences all impede the smooth launching of enterprises. Ironically enough, the policy imperatives with their trust on protecting the new entrepreneurs in the small sector from the shocks of unequal market relations with the large sector, have turned out to be the hardest stumbling blocks on their path to growth and prosperity. Complex and burdensome regulatory and administrative environment created as a result of excessive state intervention became the major deterrent to the emergence of new entrepreneurship.

The changing economic scenario domestically and globally warrants that this exercise is done in right earnest without losing much time.

With liberalization setting in, it was bound to be sooner, rather than later, that a new business class would emerge. Never could we have predicted that Azim Premji, who inherited a vegetable oil company, could beat traditional industrialists in becoming the richest India. And that a school teacher’s son, Narayana Murthy, would own the most valued company in the country, Infosys. Such twists of fate, possible only in today’s India, were a far cry a decade ago.

Efforts to Foster Entrepreneurship in India

Many of India’s leaders have perceived the need to shift some of these barriers to the development of entrepreneurship in their country, and a number of programs have emerged to meet this need.Various agencies participate in entrepreneurial development across India. To coordinate and oversee their activities, the Ministry of Industry established the National Institute for Entrepreneurship and Small Business Development (NIESBUD). The institute organizes entrepreneurship development programs, prepares manuals, and produces educational videos; its training activities are restricted to stimulating, supporting, and sustaining entrepreneurship. A sample program is entitled “Training Trainers for Barefoot Managers.”

Among the non-governmental organizations promoting entrepreneurship in India is the Progress Harmony Development (PHD) Chamber of Commerce and Industry.

The organization has since grown to include over 1,600 direct members and 80 associates serving over 22,000 small enterprises.

Functions of the PHD Chamber of Commerce and Industry include:

Providing support to the economic and social growth process by developing entrepreneurial skills and attributes;

Promoting not only new ventures, but also improving the productivity of existing self- employment;

Including rural and less developed areas in PHD activities;

Fostering a spirit of self-reliance and self-confidence to make entrepreneurship self- generating; and

Providing specific services such as training, consulting, and a computerized data bank.

What could be a better option than entrepreneurship?

Entrepreneurship could take off the excess of labor from the farms that causes disguised employment. Disguised Employment means that there might be groups of people working on the farmland and calling themselves employed. However, when these people are taken off that farm and employed elsewhere, the production of the farm does not go down. Hence, such people though employed do not add to the production of the farm.We have also seen in recent past that despite enough food stocks with government warehouses, people are dying of starvation. This indicates problem with the public distribution system. The question is, do we have to depend on government public distribution system? The response is, people taking up entrepreneurship themselves in the form of Trading and Cooperatives.

The basic entrepreneurial principles should be applied to rural development. This would result in: 

a] Better distribution of farm produce resulting in the rural prosperity.

b] Entrepreneurial occupation rural for youth resulting in reduction of disguised employment and alternative occupations for rural youth.

c] Formations of big cooperatives like Amul for optimum utilization of farm produce. 

d] Optimum utilization of local resource in entrepreneurial venture by rural youth

THE SUPPORT SYSTEM:

However, there has not been enough development in this area. One of the reasons can be that management modes used were largely governmental. Those who were charged with the responsibility of rural development were either bureaucrats or technocrats, who were using only the schemes as the motivation for developing entrepreneurs, without providing the necessary training for running an enterprise. Wherever we see on oasis of development in the desert of rural underdevelopment, we can trace an imaginative entrepreneur, who has used the correct mode of management of rural entrepreneurial venture to the best.

For example, the case of dairy development in the State of Gujarat. This model is popularly known as “Amul Model”. The Gujarat experiment was started more than 30 years ago. Starting from a small complex of eight societies which originally collected only a few hundred litres of milk it has grown into a huge complex collecting nearly seven lakh litres of milk per day from 240,000 members organized into 840 village societies. Today 90 per cent of the processed butter and cheese market of the organized sector in the country is controlled by Amul. This has helped small farmers. Behind the success of this co-operative venture is that dynamic entrepreneur and leader, Dr. Kurien whose target of opportunity seeking is not financial but social gain, not for himself, not for the enterprise or agency he works for, but for the people he serves.

The model for frozen peas market developed by MAFCO in Maharashtra is another success story. This venture was started eight years ago. During the first year only 10 tonnes of peas were sold, which went up to 42 tonnes in the second year, 120 tonnes in the third year and 140 tonnes next year and so on. Behind this success story is also that the entrepreneur who could foresee and implement his plans of marketing. The opportunities in this area are quite big. For example, the market for vegetables in West Asia is approximately Rs. 36 lakhs per day, to be transported by air daily. What is lacking is managerial talent, which could exploit these opportunities by organizing small farmers of this country.

Despite impetus provided by government there has not been much development in the rural area. One of the major reasons why not much headway has been made in this area during the last 50 years is the lack of committed government officials implementing these projects. However, before a profile of these rural Entrepreneurs is carved, it is necessary to review the existing rural scene and the agencies involved in the rural development. Such a review would help us in understanding the problems of rural India in a better way. This would also help us in drawing the profile of the Entrepreneurs for rural development.The term Entrepreneur for rural development is being utilized instead of Entrepreneurs for rural industries.

The major problem with these entrepreneurs is that they look at the community only as a market. For example, a tractor manufacturing and marketing company looks at the rural India as a big market for his tractors/without thinking of its innovative usage in urban and semi-urban areas, like tractor being utilized for town planning and Municipal Corporation’s jobs.The industries in rural areas should be set up not just to take advantage of the cheap labour but also to bring about an integrated rural development. Similarly, rural entrepreneurs should not only look at rural areas as their markets, they should also see the challenges existing in the urban markets. They may not be setting up only an industry they might be bringing about a revolution with their innovative ideas. They may not set up manufacturing units, they may set up a seed raising farm or carry out the trading for the benefit of millions. Based on our understanding of the need of rural industrial ventures, let us try to draw the profile of rural entrepreneurs.

PROFILE OF A RURAL ENTREPRENEUR:

a] He should not be an individualist. He should have a group orientation. He should consider the rural society not as his market but as his own large family.

b] He should practice a management style where the concern for people is the highest.

c] He should have a strong commitment for rural development.

d] He won’t be interested in usual perks and entertainment allowance. Social gain will be his perk and the smiles on the faces of impoverished rural population his only allowance.

NEED FOR SOWING THE DREAM IN THE MINDS OF RURAL YOUTH:

“Youths in the rural areas have little options”, this is what they are given to believe. This is the reason that many of them either work at farm or migrate to urban land. The need is to plant other options in the minds of rural youth. Entrepreneurship could be the best option. If planted and nurtured in the minds of rural women and youth, it could result in revolutionizing the Indian economy.It should be emphasized that the projects undertaken by these entrepreneurs should not be constrained by its location in rural area. It should enjoy all the advantages of the location. Following are the advantages of rural industrial projects:

A] Tax holidays and other tax advantages given to rural projects.

B] Abundance of cheap labor.

C] Advantage of local and regional resources in case the unit uses them as a raw material.

D] Prestige and respect among the local community

E] Live example for local youth for taking up entrepreneurial project

F] Support and motivation from local people 

G] Competitive advantage over the big business due to the proximity to the raw material and labor.

H] Employment generation for local people.

There are many enterpreunership programs which are setup by the government and non-government organizations for the purpose of bringing new individuals to take up enterpreunership which would help in Economic growth and foster India in the global market.

National Bank for Agriculture and Rural Development (NABARD)

NABARD was setup in 1982 to promote integrated rural development. Since then, it has been adopting a multi-pronged, multi-purpose strategy for the promotion of rural business enterprises in the country. Apart from agriculture, it supports small industries, cottage and village industries, and rural artisans using credit and non-credit approaches. It offers counselling and consultancy services and organises training and development programmes for rural entrepreneurs.

The Rural Small Business Development Centre (RSBDC)

It is the first of its kind set up by the world association for small and medium enterprises and is sponsored by NABARD. It works for the benefit of socially and economically disadvantaged individuals and groups. It aims at providing management and technical support to current and prospective micro and small entrepreneurs in rural areas. Since its inception, RSBDC has organised several programmes on rural entrepreneurship, skill upgradation workshops, mobile clinics and trainers training programmes, awareness and counselling camps in various villages of Noida, Greater Noida and Ghaziabad. Through these programmes it covers a large number of rural unemployed youth and women in several trades, which includes food processing, soft toys making, ready-made garments, candle making, incense stick making, two-wheeler repairing and servicing, vermicomposting, and non conventional building materials.

National Small Industries Corporation (NSIC)

This was set up in1955 with a view to promote, aid and foster the growth of small business units in the country. This focuses on the commercial aspects of these functions.

Supply indigenous and imported machines on easy hire-purchase terms.

Procure, supply and distribute indigenous and imported raw materials.

Export the products of small business units and develop export-worthiness.

Mentoring and advisory services. • Serve as technology business incubators.

Creating awareness on technological upgradation.

Developing software technology parks and technology transfer centres.

A new scheme of ‘performance and credit rating’ of small businesses is implemented through National Small Industries Corporation (NSIC) with the twin objectives of (i) sensitising the small industries about the need for credit rating and (ii) encouraging the small business units to maintain good financial track record. This is to ensure that they score higher rating for their credit requirements as and when they approach the financial institutions for their working capital and investment requirements.

Small Industries Development Bank of India (SIDBI)

Set up as an apex bank to provide direct/indirect financial assistance under different schemes, to meet credit needs of small business organisations.

To coordinate the functions of other institutions in similar activities.

The National Commission for Enterprises in the Unorganised Sector (NCEUS)

The NCEUS was constituted in September, 2004, with the following objectives:

To recommend measures considered necessary for improving the productivity of small enterprises in the informal sector.

To generate more employment opportunities on a sustainable basis, particularly in the rural areas.

To enhance the competitiveness of the sector in the emerging global environment.

To develop linkages of the sector with other institutions in the areas of credit, raw materials, infrastructure, technology upgradation, marketing and formulation of suitable arrangements for skill development. The commission has identified the following issues for detailed consideration:

Growth poles for the informal sector in the form of clusters/ hubs, in order to get external economic aid.

Potential for public-private partnerships in imparting the skills required by the informal sector.

Provision of micro-finance and related services to the informal sector.

Providing social security for the workers in the informal sector.

Rural and Women Entrepreneurship Development (RWED)

The Rural and Women Entrepreneurship Development programme aims at promoting a conducive business environment and at building institutional and human capacities that will encourage and support the entrepreneurial initiatives of rural people and women. RWE provides the following services:

Creating a business environment that encourages initiatives of rural and women entrepreneurs.

Enhancing the human and institutional capacities required to foster entrepreneurial dynamism and enhance productivity.

Providing training manuals for women entrepreneurs and training them.

Rendering any other advisory services.

World Association for Small and Medium Enterprises (WASME)

It is the only International NonGovernmental Organisation of micro, small and medium enterprises based in India, which set up an International Committee for Rural Industrialisation. Its aim is to develop an action plan model for sustained growth of rural enterprises.

Apart from these, there are several schemes to promote the non-farm sector, mostly initiated by the Government of India. For instance, there are schemes for entrepreneurship through subsidised loans like Integrated Rural Development Programme (IRDP), Prime Minister Rojgar Yojana (PMRY), schemes to provide skills like Training of Rural Youth for Self Employment (TRYSEM), and schemes to strengthen the gender component like Development of Women and Children in Rural Areas (DWCRA).

There are schemes to provide wage employment like Jawahar Rojgar Yojana (JRY), food for work etc., on rural works programmes to achieve the twin objectives of creation of rural infrastructure and generation of additional income for the rural poor, particularly during the lean agricultural season. Last, but not the least, there are schemes for specific groups of industries such as khadi, handlooms and handicrafts.

Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

To make the traditional industries more productive and competitive and to facilitate their sustainable development, the Central Government set up this fund with Rs. 100 crores allocation to begin within the year 2005. This has to be implemented by the Ministry of Agro and Rural Industries in collaboration with State Governments. The main objectives of the scheme are as follows:

To develop clusters of traditional industries in various parts of the country;

To build innovative and traditional skills, improve technologies and encourage public-private partnerships, develop market intelligence etc., to make them competitive, profitable and sustainable; and

To create sustained employment opportunities in traditional industries. 9. The District Industries Centers (DICs)

The District Industries Centers Programme was launched on May 1, 1978, with a view to providing an integrated administrative framework at the district level, which would look at the problems of industrialisation in the district, in a composite manner. In other words District Industries Centers is the institution at the district level which provides all the services and support facilities to the entrepreneurs for setting up small and village industries.

Identification of suitable schemes, preparation of feasibility reports, arranging for credit, machinery and equipment, provision of raw materials and other extension services are the main activities undertaken by these centers.

Broadly DICs are trying to bring change in the attitude of the rural entrepreneurs and all other connected with economic development in the rural areas. Even within the narrow spectrum, an attempt is being made to look at some of the neglected factors such as the rural artisan, the skilled craftsman and the handloom operator and to tune up these activities with the general process of rural development being taken up through other national programmes. The DIC is thus emerging as the focal point for economic and industrial growth at the district level.

Entrepreneurship education for the educated young people has a history of only

several years, but it has already developed fast. Employment pressure has made EE in India’s

higher education system absolutely important, but the cultural barriers and the difficulties

towards start-ups prevent EE from being successful. The following are recommended for the

development of EE in India’s higher education system:

Fostering Entrepreneurship Culture

The formation of an entrepreneurship culture is the prerequisite of a successful EE in

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India’s higher education system. Students and faculty members will participate in EE more

actively only if the whole society advocates entrepreneurship and risk-taking, and

entrepreneurs are respected.

The formation of an entrepreneurship culture can be done through a host of

interventions like the use of media, the creation of literature for inculcating entrepreneurial

values, documentation of cases, success stories, video films, and behavioral exercises, etc.

Since the formation of an entrepreneurship culture acts in accordance with the development

of the national economy, it will be a long and hard process in India.

Creating an Entrepreneurship Environment

In India, although many business regulations were removed during the 1990s, many

of the old bureaucrats remain. The improvement of infrastructure in India will take a long

time because of its less developed economy. But at least the state policies (both central and

state governments) can be made more entrepreneurship friendly. For example, the “single

window scheme” needs to be implemented. With the deepening of reform, a favorable

entrepreneurship environment will be formed, and this in turn will benefit EE in the higher

education system.

Refining Techniques of Entrepreneurship Education

Entrepreneurship education is different from a typical business education. Business

entry is a fundamentally different activity from managing a business. EE must address the

equivocal nature of business entry. To this end, the EE must include skill-building courses in

negotiation, leadership, new product development, creative thinking and exposure to

technology innovation. Other areas identified as important for EE include an awareness of

entrepreneur career options; sources of venture capital; idea protection; ambiguity tolerance.

These are characteristics that define the entrepreneurial personality from which one draws

when faced with the challenges associated with each stage of venture development. The

following learning tools are useful in EE: business plans; student business start-ups;

consultation with practicing entrepreneurs; computer simulations; behavioral simulations;

interviews with entrepreneurs, environmental scans; “live” cases; field trips, and the use of

video and films.

Different educational institutions have different situations; a successful model in one

institution may not be available in other institutions. EE in the different institutions may have

characteristics peculiar to each institution, but some key elements must be considered

compulsory. Student selection is the first step, and then those selected students need to be

motivated. After the motivation phase, they should be given special entrepreneurship training.

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And finally, students have to be provided with proper and adequate support.

At present, besides the special entrepreneurship training, EE in Indian educational

institutions also needs to instill certain basic ideas in doing business. For instance, in doing

business, being punctual is very important. University students need to be reminded of the

basic trait.

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