16 April 2018, 03:04 PM

Invest in entrepreneurship for economic development

Invest in entrepreneurship for economic development

Before liberalisation, most Indian businesses functioned with contacts based on licences, government connections and were integrally related to the bureaucratic system. Market competition was relatively less. The government aimed at import substitution to attain economic development. The era was not entrepreneur-friendly, capital was meagre, and the business community avoided risks.

Entrepreneurship is a less desirable career choice in India as compared to other developing countries like Brazil, China, and South Africa. According to a survey by Global Entrepreneurship Monitor (GEM), a global consortium that researches  on entrepreneurship, only 39.3% in India think of entrepreneurship as a good career choice as compared to 65.9% in China, 73.8% in South Africa, and 77.7%  in Brazil. 

Growth of Indian entrepreneurs

The government liberalised the Indian economy in 1991. Family businesses, which dominated Indian markets, now faced competition from multi-nationals that had superior technology, financial strength, and deeper managerial resources. This ushered in a significant churn in the economy. While many Indian businesses were successful in adapting to the new economic realities, others struggled and failed. A new breed of businesses emerged. Many of them were companies who focused on Information and Communication Technology (ICT). The post-liberalisation era witnessed a large number of successful IT businesses, which were customer-focused and professionally managed. Opportunities grew manifold.

At present, entrepreneurs are cautious about their access to venture and growth of capital with a reasonable business model and customer-friendly services. N.R. Narayana Murthy co-founded Infosys in 1981 with an initial capital of Rs 10,000 ($250.00). The success of his company gave a fillip to the IT services industry in India and encouraged entry of several new IT businesses. However, to maintain business growth, Indian entrepreneurs need to segregate operating control of the business from the beneficial ownership. They also need to mitigate business and family succession risks.