General Management
Feb., 2012
The Emergence Of Indian-Entrepreneurism In India
DR. A. B. DADAS Professor, Neville Wadia Institute of Management Studies & Research, Pune-1.
ABSTRACT ENTREPRENEURWho is an entrepreneur? An entrepreneur is a person who develops a new idea and takes the risk of setting up an enterprise to produce a product or service which satisfies customer needs. All entrepreneurs are business persons, but not all business persons are entrepreneurs. India’s economic development strategy immediately after Independence was based primarily on the Mahalanobis model, which gave preference to the mining, agriculture, investment goods sector, with secondary importance accorded to the services and household goods sector. Earlier entrepreneurs had to obtain a location permit (License Raj) prior to the start of their company. Bribery and Corruption followed soon after. A slow pace of development was reflected in the late 1950s and early 1960s, In 1980 India began to liberalize imports and encouraged small and medium scale entrepreneurs. Further, the economic reforms were introduced in 1991, led to the economic focus changing from an agro based economy to an industrialized economy. Indian entrepreneurs started focusing on expanding their markets and acquiring more customers. Now India is taking part in global entrepreneurship as well. Given recent economic reforms, India's GDP has also arisen from 21 % to 33 %, and India's foreign exchange reserves have reached over $200 billion. The emergence of entrepreneurism in India’s future economic development is a pointer to INDIA’s growth story.
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Key Words: Entrepreneurship, License Raj, Entrepreneurism in India-Economic Reforms 1991, Global Entrepreneurship INTRODUCTION: Entrepreneurship is the carrying out of a fresh organization or restructuring an organization, which has already been into existence. It is often a complicated enterprise so consequently numerous enterprises find loads of difficulties in survival. This is an entirely different field involving unique personality traits on the part of the entrepreneur, such as good communication skills, patience, foresightedness, and many more traits, which heads his personality to a brighter side. Entrepreneurism has various forms such as sole trading, partnership, etc. Definition:
What is entrepreneurship? Who is an entrepreneur?
Any person running huge production projects without any kind of threat, but with the aid of economic funds provided by the government or private players was known as an entrepreneur. Hirsch, Peter and Shepherd revealed that first entrepreneur definition took Marco Polo as an example of an upcoming entrepreneur who made the greatest attempt of establishing the trade routes. According to Merriam-Webster's online dictionary, "An entrepreneur is one who organizes, manages, and assumes the risk of a business or an enterprise". An entrepreneur as an organizer who controls, systematize, purchases raw materials, arranges infrastructure, throw in his own inventiveness, expertise, plans and administers the venture. This is in fact the essence of Entrepreneurism. History of entrepreneurship in India: India’s economic development strategy immediately after Independence was based primarily on the Mahalanobis model, which gave preference to the investment goods industries sector, with secondary importance accorded to the services and household goods sector. For example, the Mahalanobis model placed strong emphasis on mining and manufacturing (for the production of capital goods) and infrastructural development (including electricity generation and transportation). Several entrepreneurial phases in India have passed since independence. A slow pace of development was reflected in the late 1950s and early 1960s, as the entire economy was changing from an agro based economy to an industrialized economy. Soon after that the upcoming entrepreneurs got support from the government as well. A number of SSI sprouted up in late 1960s and 1970s. Here an intensive movement was initialized for further promotion of entrepreneurship. Finally, in 1980 India was able to liberalize imports and began with small and medium scale entrepreneurs. Further, the economic reforms were introduced in 1990. It was a kind of disillusion for the budding Indian entrepreneurs and now in the 2000 the entrepreneurial scenario has undergone a vast change. The emergence of Indian entrepreneurs - Entrepreneurism in India: Today, many more Indian entrepreneurs are emerging in the business world. Astonishingly enough, they are quite different from when they first appeared over twenty years ago. In the 1980s, the Indian economy was greatly bogged down by an atrocious socialistic ideology, whereby a rigid license raj and corrupt bureaucratic control was how businesses were conducted.
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It began when Jawaharlal Nehru, India's first Prime Minister, wanted to tailor the Indian economy after the Soviet Union's socialistic economic structure. In his mind, he strongly believed that the state should control every aspect of the Indian economy, and thus, a planned economic growth could be achieved. His idea revolved around issuing licenses to a worthy few who were selected based on their credentials and the existing market economies of operation. Although Nehru had good intentions, the way he executed his plan proved to be counterproductive. Nehru strongly believed that they should focus their efforts on nation building rather than selling products or competing with each other, because he felt that it did not directly contribute to this cause. To ensure that the concept of nation building was properly enforced by all business owners, Nehru made sure that every entrepreneur received a "certified nation building" license from the relevant license officer. He also put forth a rule stating that only two to three companies could be granted a license within the same industry, greatly limiting the possibility of establishing competition. In addition, Nehru wanted industries to be located all over India, rather than be positioned at select industrial hubs; a strategy which he theorized would ensure a balanced industrial growth. Therefore, he passed laws requiring entrepreneurs to obtain a location permit (license) prior to the start of their company. In order to avoid capitalistic monopolies, Nehru stated that companies should obtain licenses to expand their production capacity. To prevent money laundering within companies, another major issue, Nehru made it mandatory for the excise and licensing officials to visit and audit every company each year in order to ensure quality assurance. All of these strict regulations had their problems as well. Not only did every entrepreneur need to obtain multiple licenses but the government officers who were in charge of overseeing all licensing aspects were underpaid and eventually resorted to bribery and corruption. This led to entrepreneurs paying bribes in order to acquire the necessary licenses. Situations got so precarious that even business owners had to obtain a government license just to meet with foreign business delegates in other countries. During those times, entrepreneurs flocked around ideas that mostly involved cornering manufacturing or importing licenses. This sort of business environment offered absolutely no incentive to invest time in technical innovation to reduce manufacturing costs or even offer better quality products and services since one could get far higher results by influencing the customs or excise officer to classify a product under a category that attracted a lower rate of duty. During this license raj, most highly qualified young Indian graduates had no family connections nor were interested in influencing excise officers. The govt was pre-occupied with canalization of resources into their most productive uses. Investments were carried out both by the government and the private sector, with the government investing in strategic sectors (such as national defence) and also those sectors in which private capital would not be forthcoming because of lags or the size of investment required (such as infrastructure). The private sector was required to contribute to India’s economic growth in ways envisaged by the government planners. Not only did the government determine where businesses could invest in terms of location, but it also identified what businesses could produce, what they could sell, and what prices they could charge. These were ominous signs for any Entrepreneurial activity and the resultant sluggish rate of economic growth. In the late 1950s and 1960s, the government established public sector enterprises in such areas as production and distribution of electricity, petroleum products, steel, coal, and engineering goods. In the late 1960s, it nationalized the banking and insurance sectors. To alleviate the shortages of food and other ISSN 2230-9667
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agricultural outputs, it provided modern agricultural inputs (for example farm machinery, irrigation, high yielding varieties of seeds, chemical fertilizers) to farmers at highly subsidized prices .This active and dominant participation by the government in economic activities resulted in the creation of a protected, highly-regulated, public sector-dominated economic environment. Along with this government domination of the economy, India soon faced not only some major problems in its overall approach to development, but also lack of entrepreneurial enterprises. The complex system of government controls, including price ceilings, along with the resultant corruption, meant that decision making was arbitrary and the transactions non-transparent. Price controls were only one example of the regulated economic environment. Another example of a harmful policy was the control of ownership of private capital (both income and wealth) by Indian nationals in India and also by foreign nationals doing business in India. Realizing that the existing economy was in dire crisis, Indian business practices began changing for the better in 1991 after extensive economic reforms. Economic reforms to move from a centrally-planned development strategy to one based on market-based resource allocations. By ridding the old socialistic license raj system, Indian govt put into place a number of policy reforms, projects and ventures to jumpstart the entrepreneurs in order to achieve their business goals. Indian business practices began changing for the better in 1991 after extensive economic reforms. Tax sops, incentives and govt support was made readily available to the Entrepreneurs. This encouraged them to start focusing on expanding their markets and acquiring more customers. Economic reforms moved from a centrally-planned development strategy to one based on market-based resource allocations. India’s improved exchange rate management restored the confidence of entrepreneurs/investors, which led to improved financing in almost all spheres. Rapid economic has resulted since the removal of the license raj. For instance, the Indian economy has sustained an average growth rate of over 6% annually, with the gross domestic product or GDP being around 9.2 % between 2006 and 2007. In the past decade, India's GDP has also arisen from 21 % to 33 %, and India's foreign exchange reserves have reached over $200 billion. Domestic markets have also grown substantially to support innovation. Worldwide, India's vast economic success is recognized by many national and international corporations who have not only taken advantage of its pool of high-quality scientific talent but have also established many research and development facilities (R&D) throughout India. Today's promising market conditions have been very encouraging to many young engineering graduates who strongly believe that they have the technical knowledge and skills to attract new customers. These young Indian entrepreneurs are not the typical and conventional business entrepreneur. They are the children of many business professionals. As elite graduates of IITs, National Institutes of Technology, Indian Institute of Science, and the IIMs, this new young breed of worthy entrepreneurs have targeted their efforts on innovative ways to technologically address the genuine needs of millions of people. In the past few years, entrepreneurism in India has taken off. The reasons for this emerging Indian Entrepreneur were:• Education directed specifically at entrepreneurial skills. • Financing of entrepreneurial efforts. • Networking among potential entrepreneurs and their experienced counterparts. • Globalization and Technological Impact. • E-commerce and Internet. 22
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• Social, Economical and Political changes in the India. Indian Entrepreneurs: First Among Equals Indian engineers who migrated to the United States in the eighties have found the U.S. to be a haven for entrepreneurial pursuits and have become highly successful in their respective fields. They initially started high technology product companies in Silicon Valley that primarily focused on solving critical market problems. Most of these Indian entrepreneurs, after making fortunes by excelling in their respective market segments, started helping entrepreneurs in India with startup companies. The rapid success of Indian American entrepreneurs has led to vast angel investments in India. Organizing themselves into angel confederacies after the Band of Angels in the Silicon Valley, each member diligently researches and pools their own capital for each prospective investment. Being known for founding and establishing well-known companies such as Symantec, Logitech, National Semiconductor, Sun Microsystems, Hewlett Packard, and Intuit, etc., these angel investors like to invest their time and money into new, cutting edge, start-up companies. This trend has boasted the pace at which new startups are being established in India. Indians developed inventions and made an appreciable amount of discoveries in a variety of productive occupations. Their innovative behaviour engaged them in doing new and useful things or old things in improved way. They had a deep-seated need for a sense of independence along with a desire to do something meaningful with their time and to have their own identity. Economic autonomy or economic self-sufficiency were also deep rooted and fuelled the fire of ENTREPRENEURISM. India offers a unique incubation environment for most entrepreneurs, greatly distinguishing it from other western democracies. A country where almost 50% of the Indian population is below 35 years old, it is apparent that India has a large working class. The Indian businesses try out creative strategies to make sure their services or products reach overseas customers on time. It is this struggle to stick to the promised schedule that really differentiates an Indian entrepreneur from his/her western counterparts. Indians grow up in a chaotic environment and learn how to manage their lives in such bleak environments. Indian entrepreneurs are groomed to get things done, no matter what the odds are. The mammoth RELIANCE INDUSTRIES (Ambani’s), INFOSYS (Narayan Murthy), SHAHNAAZ HERBAL, TATASONS, BIRLAGROUP, HCL(ShivNader), SUZLON (RajanTanti) etc bore testimony to the emerging Indian Entrepreneur and Entrepreneurism in India. ITC e-choupal and Aravind Eye Care sprung up in India. Most of these initiatives are well into their second-generation, in business terms. In India, various other organizations like SEWA, AWAKE, Nandi Foundation and Jaipur Foot have been started by the awakened and empowered citizens of India. Entrepreneurism : Salient Features and Characteristics. Initiative. An entrepreneur takes actions that go beyond job requirements or the demand of the situation . Opportunity seeking. An entrepreneur is quick to see and seize opportunities. He/she does things before he/she is asked to work by people or forced by situation. Persistence. An entrepreneur is not discouraged by difficulties and problems that come up in the business or his/her personal life. Once she sets a goal she is committed to the goal and will become ISSN 2230-9667
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completely absorbed in it. Information seeking. An entrepreneur undertakes personal research on how to satisfy customers and solve problems. He/she knows that different people have different capabilities that can be of help to them. He/she seeks relevant information from his/her clients, suppliers, competitors and others. He/she always wants to learn things which will help the business to grow. Demand for quality and efficiency. An entrepreneur is always competing with others to do things better, faster, and at less cost he/she strives to achieve excellence. Risk taking. Are you afraid of uncertainties? Then you cannot be an entrepreneur. Entrepreneurs are not high risk takers. They are also not gamblers; they calculate their risks before taking action. They place themselves in situations involving moderate risk so they are moderate risk takers. Goal setting. An entrepreneur sets meaningful and challenging goals for him/herself. An entrepreneur does not just dream. Him/she thinks and plans what he/she does. He/she is certain or has hope about the future. Commitment to work. An entrepreneur will work long hours after into the night just to be able to keep his/her promise to his/her client. He/she does the work together with his/her workers to get a job done. He/she knows how to make people happy to work for him/her due his/her dynamic leadership. Systematic planning and monitoring. An entrepreneur plans for whatever he/she expects in the business. He/she does not leave things to luck. He/she plans by breaking large tasks down into small once and puts time limits against them. Since and entrepreneur knows what to expect at anytime he/ she is able to change plans and strategies to achieve what he/she aims at. Persuasion and networking. An entrepreneur acts to develop and maintain business contacts by establishing good working relationship. Uses deliberate strategies to influence others. Independence and self confidence. Most entrepreneurs start business because they like to be their own boss. They are responsible for their own decisions. Emergence Of Social Entrepreneurship in India: Social Entrepreneurship as the concept was coined long ago but has been in the corporate parlance in the recent past only. With the empowerment and awareness of the citizens of the developing world, a new revolution has started, particularly among the youth of the world. This revolution is the growth of Social Entrepreneurship – the form of entrepreneurship where profits are not the end result, but just the means to achieve the end result of social upliftment and further empowerment. CONCLUSION: India can do more, however, to further advance its economic development. Indeed, one of the more recent microeconomic approaches to economic growth is the promotion of entrepreneurial activities. Entrepreneurial efforts have been found to generate a wide range of economic benefits, including new businesses, new jobs, innovative products and services, and increased wealth for future community investment. Entrepreneurship is contagious, but the major challenge that Entrepreneurship faces today is the definition of the goals and the objectives. Unlike the corporate sector where the achievements are clearly defined and roles, it must have identified relevant goals in the first place and the strong burning desire to achieve it. All this makes it more challenging for the entrepreneurs to explore new opportunities like 24
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Bio-Technology (STEM CELL research), Eco-friendly Technology (dealing in CARBON CREDITS), Telecom Sector, Floriculture, Education, Health Care and Hospitality/services sector. In this era of globalization, the pace of growth of entrepreneurship has increased in leaps and bounds and it has sky as its limit. Entrepreneurship has shown drastic changes in almost all economies of the world providing the mankind with new domains of globalization. It has turned the world into a global village and has made the world a better place to live in. REFERENCES: Bholanath Dutta, 2010, “Entrepreneurship management text and cases”, Excel Books, New Delhi. Entrepreneurship Development. New Age International, 2008 Bholanath Dutta, 2008, “Entrepreneurial Development,” Parshava Publisher, New Delhi Anhuja Tiwari, “Entrepreneurship Development in India” S.S Khanka, (1994), “Entrepreneurial Development”, SC&Co. New Delhi Vasanth Desai, (2009), “ Dynamics of Entrepreneurial Development”, HPH, Bangalore. Http//go4funding.com/Articles/Entrepreneur/New-Beginning-funding.aspx. www.edc-iitd.org. Entrepreneurship Development. Anil kumar S. “Small Business and Entrepreneurship.” Sharma Arun , info@Youth ki Awaaz/ article, Jan 2011. Acharya, Shankar, 2001. India’s Macroeconomic Management in the Nineties (New Delhi, Indian Council for Research on International Economic Relations).
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