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Regional Strategies > Articles > New report highlights entrepreneurial drive in India >

New report highlights entrepreneurial drive in India, calls for better infrastructural and educational support

by Madanmohan Rao

Bangalore; April 12, 2002

India ranks relatively high in entrepreneurial capacity -- but is lacking in physical infrastructure, educational support, and R&D transfer, according to the Global Entrepreneurship Monitor (GEM) project's India Report 2001, released this week by the N.S Raghavan Centre for Entrepreneurial Learning at the Indian Institute of Management, Bangalore (IIMB).

The Global Entrepreneurship Monitor (GEM) project was launched in 1999 at the joint initiative of the London Business School in the UK and Babson College in the US. The project began with 10 country members in 1999, reached 29 countries in 2001 (such as Australia, Canada, Brazil, Hungary, Ireland, Japan, Korea, Singapore, Sweden), and may cross 40 this year; IIMB joined in 2000.

Two sets of surveys were conducted to address three key questions: How does the level of entrepreneurial activity vary between countries? What conditions make a country entrepreneurial? And how does the level of entrepreneurial activity affect national economic growth?

In the first research set for India, a national survey was conducted by research firm A.C. Nielsen; 2,011 respondents in the age-group of 18-74 were selected from the urban and surrounding rural populations of 8 randomly chosen cities in India, which turned out to be Delhi, Bareilly, Ahmedabad, Nasik, Hyderabad, Hubli, Calcutta, and Ranchi.

And here is perhaps one of the most glaring gaps in the research: an exclusion of key cities like Bombay, Bangalore, Chennai and Pune. Perhaps this can be addressed in future reports -- which could also add a focus on specific industry verticals like manufacturing, pharmaceutical, agribusiness, IT, telecom and biotech, which are all quite different for entrepreneurial activity.

Separately, in the second research set, interviews on entrepreneurial framework conditions were also conducted with 36 key experts in India by IIMB professors. 4 experts were interviewed to assess each of the following 9 factors: financial support to new firms (equity, VCs, public subsidies), government policy (license, taxes), government programmes (incubator programs), educational support (promotion of entrepreneurial skills via school/college courses), R&D transfer (between government, universities and private sector), legal infrastructure, market openness, physical infrastructure (telecom, utilities, speedy applications), socio-cultural support.

Demographic data was gathered in the city surveys, as well as responses to questions about entrepreneurial activities, background, investment, and employment opportunities. Demographically, the subjects were reasonably well distributed, but there was a 70-30 per cent urban-rural imbalance. Entrepreneurial activity was classified as autonomous startups, startups as part of one's job, owning and managing a business, and investing in others' business.

Based on the Total Entrepreneurial Activity Index (TEA), India ranks high among the surveyed countries in necessity-based entrepreneurship, but low on opportunity-based entrepreneurship; the former is apparently more highly correlated with projected national economic growth than the latter.

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 programmes.

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.

The history of entrepreneurship in India can be divided into the following phases: pre-colonial, colonial, pre-liberalisation, and post-liberalisation. SIDB, SIDC, SIDO, NIESBUD, and NISIET are some of the recent government-launched initiatives to assist entrepreneurs. Industrial clusters (as in Italy) and rural industrialization will play an important role in India. More emphasis on self-employment as well as fostering networking among entrepreneurs are important.

In sum, the report is a good first step for serious entrepreneurship studies in India and around the world, but in future surveys, stratified random sampling for a better choice of cities and more focus on specific industry verticals would help; the accumulation of time-series data would then enable better long-term trend analysis. Larger sample sizes would be better in future, as well as examination of the time lags between changes in frameworks, entrepreneurial activity and national growth. Finally, a companion Web site to the research would also greatly help extend its use to readers and analysts.

It would be worthwhile perhaps to conclude with the words of Rahul Bajaj (as cited in "Everyday Entrepreneurs" by Aruna Bhargava): "If we could have one entrepreneur in every family, India's economy would skyrocket."

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The writer can be reached at madan@techsparks.com

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