Entrepreneurship: The Indian Story


By

Tiyas Biswas
Lecturer
Department of Business Administration
Bengal College of Engineering & Technology
Durgapur

Dr. P.P. Sengupta
Professor
Department of Humanities
National Institute of Technology
(Deemed University)
Durgapur
 


INTRODUCTION

The story of the Indian entrepreneurship is replete with paradoxes and surprises. During the precolonial and colonial era, the entrepreneur was seen more as a trader-money lender merchant, bound rigidly by caste affiliations and religious, cultural and social forces ranging from the philosophy of Karma to the system of joint family. Entrepreneurship as we understand it today was definitely not forthcoming from this social segment. A number of political, economic factors too had an inhibiting effect on the spirit of enterprise among Indians. Lack of political unity and stability, absence of effective communication systems, existence of custom barriers and oppressive tax policies, prevalence of innumerable currency system all these combined together to restrict the growth of native entrepreneurship until around the third decade of the 19th century. The religious system of education and the low social esteem accorded to business were the other potent forces that discourage the emergence of large scale commercial ventures in the preindependence India.

The first half of the present century witnessed a gradual change in the scenario. During this period, there was a visible tendency among the natives to take to business. The spread of secular education, rising nationalist feelings and social reform movements must have given a fillip to this initial phase of the emergence of entrepreneurship. Further, the two world wars and the enormous opportunities they created for the growth of Indian industrial ventures brought about a radical change in the societal attitudes in favour of industrial entrepreneurship and broadened the vision of Indian businessmen. The independent India thus could claim to have created a conductive climate for spread of entrepreneurship. It is in this broad backdrop that the later evolution and growth of Indian entrepreneurship has to be located.

ENTREPRENEURSHIP IN INDEPENDENT INDIA

In a mixed economy, as India was defined by architects of this republic, with the public sector having the definite upper hand, the role of the state becomes very crucial. By its very nature such an economic system could not adequately focus entrepreneurs as catalyst of economic development. The state rather assumed the role of the major entrepreneur. Possibly and rightfully so, the overriding concern of the newly independent country related to correcting the anomalies and distortions created by the colonial rule.

Issues like employment generation, distributive justice and balanced regional development thus occupied the centre stage of industrial policy making in India. The first Industrial policy resolution of 1948 was a solid statement of the country's philosophy of growth, the vital aspect of which was industrialization under government regulation. Naturally neither this policy nor the subsequent ones made any specific reference to the entrepreneur or entrepreneurship. It is interesting to note that even the small scale sector, which later came to be known as ' the breeding ground of indigenous entrepreneurship', has been promoted and nurtured for its potential for addressing the larger developmental concerns. Such concerns, together with a gradually expanding public sector had set out a framework of industrialization where the cornerstones were controls, regulation and restrictions for the large industries and a wide protective umbrella with special incentives and institutions for the small ones. This was the scenario till late 1980s.

THE SMALL IS BEAUTIFUL

In spite of the domineering presence of large and medium enterprises in the economic scene (the history of many such enterprises goes back to the preindepence era) it is the small sector that that has always dominated the inquiries into Indian entrepreneurship. In fact, this is quite characteristic of many of the developing countries. It is not that the large and medium enterprises do not manifest entrepreneurship as their small counterparts. The reason could well be that it is in the small enterprise that the presence of the entrepreneur, the most visible. Also in a country like India which is vast , diverse, and less developed, small enterprises have a very definite role to play not only by contributing towards employment and income generation, but also in attending to the specific needs of a large proportion of  customers. Their greater visibility may also be attributable to the fact that inspite of all odds on the policy and market fronts, several thousand s of small enterprises thrive in a large number of production spheres. More importantly, the small scale sector has helped widen the entrepreneurial base by giving rise to a new class of entrepreneurs from the ranks of employees, business executive, technicians and professionals. Thus was broken the earlier myth that entrepreneurship is an exclusive domain of the socially conservative, traditional trading communities. In fact, in this 1960 study of small entrepreneurs in the then State of Madras, James Bean observed that entrepreneurs could emerge from a wide range of social and economical backgrounds.

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. A study of 53 projects financed by banks and the Gujarat State Financial Corporation during the period 1965-68 revealed many interesting things. More than two thirds of institutionals loans were for diversifications and expansion of existing enterprises. Of the new new loans, 30% were given to merchants and traders with adequate financial resources and hence the required collateral. The entrepreneur's financial stake stood very high in the transactions tat a debt equity ratio 1:1. Such policies evidently were holistic to an aspiring and an otherwise competent young entrepreneurs but without enough financial resources and tangible assets. As an innovative alternative to the conventional banking system an Industrial Investment Corporation was set up as a State company in Gujarat in 1968 with attractive and unconventional credit schemes.

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. For example, potential micro enterprises in the rural sectors by the poor, whose ventures have only limited investment and low levels of  technology must be addressed differently from those of enterprising women whose talents and creativity have been suppressed by age-old socio-cultural norms and practices. Both need appropriate approaches so that they become capable of manifesting their entrepreneurial competence.

Despite efforts made made by a host of institutions, only less than 20% of the new entrepreneurs have access to training every year. This means that a large mass of potential entrepreneurs are still outside the reach of training interventions.

THE TRANSFORMING SENERIO

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. An uncanny situation has thus been created. On the one hand the numbers look impressive almost 15 million jobs, over two million enterprises; around 7500 products. On the other, a good number of firms are observed to be failing due to financial inadequacy, technological obsolescence and managerial inefficiency. We have to sit back and take stock of the past now to see where and why we have gone wrong in our assessment and planning.

The changing economic scenario domestically and globally warrants that this exercise is done in right earnest without losing much time. The goals of economic policy in the nineties and beyond appear now to be two fold: developing a viable, efficient and internationally competitive small industry and creating an innovative, socially responsible and liberated class of entrepreneurs who can take on the challenges that spring up as the process of liberalization and reform progress.

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.

CONCLUSION

Entrepreneurship must be developed and supported so that there is a proliferation of SMEs in the country. An entrepreneur's entry into business does not guarantee his/her survival. Attrition rate for new entrepreneurs is very high in many countries of the world. While this may be because their chosen business inappropriate or a lack of adequate technical or business expertise, one critical reason is that overall macro and micro environment in which they are forced to operate. Therefore a key consideration by the government should be to critically evaluate the exiting macro economic policies and their impact on grassroots entrepreneurship development.
 


Tiyas Biswas
Lecturer
Department of Business Administration
Bengal College of Engineering & Technology
Durgapur

Dr. P.P. Sengupta
Professor
Department of Humanities
National Institute of Technology
(Deemed University)
Durgapur
 

Source: E-mail April 17, 2008

          

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