How do you define entrepreneurship? I measure it on the following 2 scales.
1) Innovativeness, ability to anticipate the changing trend and find a unique solution. One size does not fit all.
2) Having the dignity towards labor and understanding what you do is not important, but what difference you make is important.
3) Ability to scale up this enterprise to increase revenue many folds.
If I look at the rich and well to do, I see them opening up new malls, high-rise buildings, bridges and industries everyday. So most of them have a vision, grand plans and they live to complete them. The era of Tata, Birla where richness was due to inheritance is gone. Most of the Indian richest are self made man.
I was also amazed to find the level of entrepreneurship in the common Indian. If there is a Parent-Teacher meeting, or admissions queue in front of the school, tens of hawkers will swarm the place. Each of them have a unique eatable to offer thus placating the taste buds of everybody. If there is a water-logging, immediately youth will form gangs helping the car-drivers roll the cars to safety. Even before an office is opened, a Pan shop and a tea stall opens up right in front of it. Most tourist places have multi-lingual guides who not only speak their native languages and English, but also the foreign languages. No organized enterprise even in developed countries can match the speed with which they customize their offering to grasp the new window of opportunity. The security guards of most buildings double up as car washers, milk/newspaper delivery boys to earn extra income demonstrating that even people who have a stable source of income keep their eyes and ears open.
Unfortunately most of these success stories are not scalable. If you meet a small time entrepreneur after a decade, most likely he will still be doing the same job, will have the same number of wares. For someone who always thought that taking the first step is like completing half of the journey, this was an eye opener. However little research found a variety of reasons why they failed to grow:
1) The acid test of any business is cash flow crunch. Most enterprises fail not because they were not profitable, but because they could not manage their cash flows. Indian govt, by their postal schemes which pay 2.5% above the bank rates, suck up a lot of free capital.
Banks which have the best information about the credit rating of the people shy away from their duty of lending. They prefer to keep the money in treasury bonds instead of issuing business loans.
2) Harassment: Most people have to pay Hafta/protection money to either local mafia or police, sometimes to both. Not only it kills the spirit of free enterprise, but these people act like parasites damping the whole environment
3) Black money in Indian society: A lot of under the table transactions happen in Indian society. Unless the owner himself is involved, there is huge likelihood that he will also get duped. This is the single largest factor why there are not too many professionally managed enterprises.
to be continued…..
4 replies on “Entrepreneurship in india”
Interesting article, and good observations too. Btw, I’m not so sure that post office schemes suck up that much capital??
The percentage of the capital mopped up might not be great for post office. But what is most important is the source of this capital.
Almost all of it comes from the villages and from the poor in cities which do not have access to banking system. So in a way govt collects money from these poor, but it never re-issues it to them back as loans. Instead it will deposit it in the central treasury. I believe that poverty is not alleviated by gathering interest on your deposits, but using/investing it wisely… could be on education, housing, or something which leads to a steady source of income.
PS: I am not opposing govt using post office to provide banking to the villages and for the poor. I am opposed to the idea that govt is subsidizing these bank deposits and paying 8-8.5% interest when the prevailing commercial banks give just 3.5% in savings and 5-5.5% in long term fixed deposit.
good explanation..I’m all for reinvestment..afterall currency is best when in circulation..as the old adage goes..
well now government has started forcing banks to start lending instead of coming to it for deposits.
this hopefully will infuse much needed capital back in the system.