Despite some popular claims, historical records of commercial policies of the Western economies indicate an inherent, age-old struggle between liberalism and protectionism. Indeed, in the West, free trade has always been the exception and protectionism the rule. On the contrary, the entire Asian region, which is often called the third world or the developing world, holds a glorious history of trade exchanges.
Till 1500, India was the leading economic power of the world. In 1760, when the West initiated a transition towards new manufacturing processes - the first industrial revolution - India still had the position of the world’s largest economy and China was the only country that was capable of competing with it. Even a century later, in 1820 when the industrial revolution started gaining momentum, India and China accounted for half of the world’s GDP and the United States and United Kingdom had only 2% contribution to the world economy. However, colonial rule destroyed both these economies and by 1900, the combined share of India and China had crashed to 8.6% (China 6.8% and India 1.8%), while that of the US and UK reached 42%.
The 21st century started with China’s remarkable return to the global economy. The exponential growth in manufacturing and exports has catapulted China’s position to make it the world’s second-largest economy and a leading trading nation. The tremendous growth of the two Asian economies - China and Japan - has already busted many myths about global growth patterns. Now the world is looking at India. There is a consensus that India’s transition from its current status of being the sixth biggest economy to becoming the third biggest economy will happen early and smoothly.
India has enormous entrepreneurial capabilities. It is the world’s third-largest start-up base but its entrepreneurial spirit is not limited to the start-up segment. However, had it not been for some visionary Indians, this spirit of enterprise would have remained isolated and unorganised.
In 1992-93, some interesting findings about India’s entrepreneurial potential came to the forefront when a team of volunteers led by an eminent thinker, Swaminathan Gurumurthy (who is currently serving as the part-time Director of the Reserve Bank of India) decided to travel across the country to explore the cultures of different industrial clusters in India. His team conducted a six year long empirical study and covered over 42 key industrial clusters like Ludhiana, Batala, Amritsar, Rajkot, Jamnagar, Surat, Vadodara, Morbi, Tiruppur, Namakkal, Karur, Sivakasi, and Thoothukudi. Their research revealed surprising facts about India’s entrepreneurial potential as it explored several astonishing entrepreneurial hubs that were silently thriving in tier-II and tier-III cities, in villages and in the remotest corners of the country.
Indian MSMEs - the real performers
India’s Micro, Small and Medium Enterprises (MSMEs) have been silent performers, carrying India’s five trillion dollar economy goal on their shoulders. Any discussion on India’s growth trajectory is incomplete without an introduction to India’s MSME sector and the spirit with which they work.
There are 63.4 million MSME units in India (mainly in rural and semi-urban areas) which contribute around 29% to India’s GDP and 49% to its exports. The MSME sector is called the backbone sector of the Indian economy as it provides employment to over 111 million people and produces over 8000 products, ranging from traditional to high tech precision items.
In India, the MSMEs are broadly divided into two categories - manufacturing enterprises and service enterprises. The top ten states which together account for a share of 74% of the total MSMEs in India are - Uttar Pradesh, West Bengal, Tamil Nadu, Karnataka, Bihar, Andhra Pradesh, Gujarat, Rajasthan and Madhya Pradesh.
MSMEs constitute around 95% of the total industries and their contributions to national income are immense. Yet, this sector has never demanded any kind of security (financial, social, medical or pension) from the government. They have built a strong community culture based on trust and cooperation. Their ventures are often an important part of their heritage, tradition and life. Interestingly, they are traditional but always open to embrace new technologies and innovations.
Tirupur- from Agriculture to Knitwear Export Hub
Tirupur, as a city, represents the vibrant entrepreneurial spirit of our country. It is a world leader in the knitted garment industry and contributes up to 90% of the total cotton knitwear exports from India. The textile industry of the city employs over six lakh people and exports knitwear of over $2 billion. Amazingly, 67% of the exporters in Tirupur are not educated above the secondary level; yet they are part of leading global supply chains.
Earlier, Tirupur was an agricultural town. However, according to the World Bank’s World Development Report 2001, “Since 1985, Tirupur has become a hotbed of economic activity in the production of knitted garments. By 1990s, with high growth rates of exports, Tirupur was a world leader in the knitted garment industry. The success of this industry is striking. This is particularly so as the production of knitted garments is capital intensive and the state banking monopoly had been ineffective at targeting capital funds to efficient entrepreneurs, especially at the levels necessary to sustain Tirupur’s high growth rates.” The report also highlighted, “The needed capital was raised within the Gounder community, a caste relegated to land-based activities, relying on community and family network.”
In 2018-19, the exports of knitwear from Tirupur crossed Rs 26,300 crore and it is expected to cross Rs 30, 000 crore in the next fiscal. In April 2019 alone, there were exports of around Rs 4,400 crore from Tirupur.
This year in the month of May, Tirupur hosted the ‘46th India International Knit Fair’ organised by the Apparel Export Promotion Council (AEPC) and India Knit Fair Association (IKFA). According to the organisers, one of the key purposes of the fair was to explore the opportunities which the Indian knitwear industry can leverage in the backdrop of the ensuing trade war between US and China.
A number of such vibrant industrial hubs are spread across the corners of the country. Time has come to channelise their energy for the larger vision.
For the first time, India has a government that believes in collective efforts and inclusive growth. It is reaching out to the MSMEs and the non-corporate sector as well. Last year, PM Modi launched the ‘MSME Support and Outreach Programme’ and unveiled 12 key initiatives to boost the sector’s growth which includes a 59-minute loan portal, compulsory 25% procurement from MSMEs by central public sector enterprises and simplification of procedures under the Companies Act. The government is also taking significant steps to ensure social security for employees in the MSME sector and establishing mechanisms to provide them with provident fund, pension and insurance.
When a complex structure like the government can demonstrate the commitment to collective efforts, why can’t businesses do the same? We have seen how the West has coined interesting theories to develop a sense of purpose for their entrepreneurs. They approach business with a religious zeal.
Entrepreneurs have always been the key actors in the growth of economies. Indian entrepreneurs have been unsung heroes who have played a crucial role during our freedom struggle and have contributed a lot in the nation-building process. Today, Indian businesses are well-equipped and ready to lead. Their collective efforts can bring surprising results. The present phase is crucial for the development of the country’s economy. In times like these, entrepreneurs should take the charge and lead by channelising their collective potential.
-The views expressed reflect those of the writer.