A crucial role in the development of emerging economies is entrepreneurship. Entrepreneurship is crucial for the development of emerging economies as it places the country on the launchpad of economic progress, stimulates job creation in the economy and helps in poverty alleviation, among many other factors. The key factor needed in an economy to make it conducive to entrepreneurship and venture building is better policies, support and financial benefits that will lay a critical foundation for the growing number of business creators and innovators in the region.
Entrepreneurship drives economic growth in emerging countries since new businesses and ventures allow entrepreneurs to introduce their products and services into a competitive market, create employment opportunities and attract foreign direct investments to contribute to the nation’s economic productivity. Entrepreneurs in emerging economies identify market gaps and develop new ideas. Mckinsey cited that 84% of the executives think innovation is essential for companies to progress in today’s competitive environment. Entrepreneurs drive technological advancements, promote knowledge transfer, and encourage a culture of continuous development, enhancing the competitiveness of emerging economies in the global marketplace.
As per a review published by Harvard Business Review’s publication, individuals and communities at the base of the pyramid account for an enormous 4 billion people who earn less than $5 per day. Micro, small, and medium enterprises (MSMEs) established by entrepreneurs can improve their standard of living by creating jobs and income opportunities for the poor, including women and youth. Small businesses also play a vital role in addressing the challenges from a societal aspect by offering solutions to complex issues such as healthcare, renewable energy, education and access to sanitation.
The environment conducive to entrepreneurship is evolving slowly but gradually. Governments and international organisations have realised the importance of entrepreneurship and are creating an environment that is suitable for the growth of businesses and industries within countries. As per the World Economic Forum’s National Entrepreneurial Context Index score, India has been ranked fourth out of 51 countries in having a quality entrepreneurship ecosystem, reflecting the steady rise in the nation's business environment over the years.
India’s ranking in the Global Entrepreneurship Monitor (GEM) National Entrepreneurship Context Index (NECI) report is a drastic turnaround following a much lower score in 2021 which was 16th overall. India's latest score of 6.1 reflects a steady increase in the country's overall entrepreneurial environment over the years.
Understanding the Boom in India’s Entrepreneurship Environment
India’s placement on the trajectory of an entrepreneurial boom is a recent phenomenon, having taken off in the early 2000s. This environment, friendly to the entrepreneurial growth in India has been largely due to the country’s growing economy, which has opened up more opportunities for entrepreneurs to start their businesses. Some of the factors that have and continue to play a critical role in this growth story are the availability of venture capital, the emergence of incubators, and the availability of a large pool of talented individuals have all contributed to the growth of entrepreneurship in India.
Entrepreneurship in India continues to be the spine supporting India’s economic growth, and placing the country well on its way to becoming an economic powerhouse. India’s path to becoming a Global Economic Powerhouse is marked by the country’s potential to create jobs and stimulate economic growth.
According to the GEM India Report (FY 21–22), India's entrepreneurial activity increased in 2021, with the country's total entrepreneurial activity rate (the percentage of the productive population who are starting or running a new business) rising to 14.4% in 2021, up from 5.3% in 2020.
Furthermore, the established business ownership rate (the percentage of adults (aged 18–64) who are currently the owner-managers of an established business, i.e., owning and managing a business that has paid salaries, wages, or any other payments to the owners for more than 42 months) rose to 8.5% in 2020 from 5.9%.
India is gradually on the path of establishing a robust startup ecosystem. The government has set up a department that focuses on helping new businesses to promote and support entrepreneurs. Additionally, the Central Government of India has implemented numerous schemes to promote entrepreneurship in India and financially assist emerging startups. Incubators and accelerators have also been established by the government to assist startups with mentoring, networking, and resource access. These incubators and accelerators provide startups with the infrastructure and assistance they need to develop their ideas and products.
As a part of its initiative to promote startups across the country under the Startup India initiative, the government has launched a few initiatives such as:
Startup India Action Plan: On January 16, 2016, a Startup India Action Plan was unveiled. The Action Plan comprises 19 action items spanning areas such as "simplification and handholding", "funding support and incentives" and "industry-academia partnership and incubation". The Action Plan laid the groundwork for the government's support, schemes, and incentives aimed at creating a thriving startup ecosystem in the country.
Regulatory Reforms: Since 2016, the government has implemented over 50 regulatory reforms to improve the ease of doing business, the ease of raising capital, and the compliance burden on the startup ecosystem.
Ease of Procurement: To facilitate procurement, central ministries and departments have been directed to relax the prior turnover and prior experience in public procurement requirements for all DPIIT-recognised startups, subject to meeting quality and technical specifications. Additionally, the Government e-Marketplace (GeM) Startup Runway has been created, which is a dedicated section for startups to sell products and services directly to the government.
Credit Guarantee Scheme for Startups (CGSS): The government has set up the Credit Guarantee Scheme for Startups to provide credit guarantees on loans made to DPIIT-recognised startups by Scheduled Commercial Banks, Non-Banking Financial Companies (NBFCs), and Venture Debt Funds (VDFs) under SEBI-registered Alternative Investment Funds. The purpose of CGSS is to provide credit guarantees up to a certain limit against loans extended by member institutions (MIs) to finance eligible borrowers, namely DPIIT-recognised startups.
Roadblocks Faced by Entrepreneurs in India
Hiring the right talent: Hiring the right talent for a startup can be a challenging task. Finding and hiring the right kind of talent for the business with skills to match growing customer expectations is one of the biggest challenges. With low salaries in comparison with other corporates, hiring skilled manpower may be a challenge. People may also have to be convinced to join these startups. The right talent will ensure a rock solid foundation which will help your startup to take the plunge.
Cultural views and lack of infrastructure support: Our focus is still on getting reputable jobs in a reputable company. In complement to that, infrastructural support such as incubation and funding are not easy to find in India. Irregular power supply, telephone reception network, etc. can be a hindrance to the growth of any business. A corruption-free environment, friendly regulations, good connectivity, a healthy environment, and efficient logistic support, can help a great deal in attracting investors in the country.
Bureaucratic Red-Tapism: Red Tapism is one of the stubborn banes of Indian bureaucracy. To a certain extent, every government is plagued with issues of Red-Tapism. In India, a maze of rules and regulations has been a disincentive for foreign investors to venture into these shores for many years. Indian entrepreneurs have equally faced the tribulations of the licence raj regime. Since the economic liberalisation policies and economic reforms of 1991, there has seemed to be light at the end of the tunnel. Since then, successive governments have tried their best to cut red tape and simplify procedures.
These are a few of the many problems faced by entrepreneurs in India, while they venture out on their business initiatives in a developing economy such as India.
It should be noted that India’s path towards becoming an economic powerhouse is not an easy journey. Certain issues such as those stated earlier continue to pose certain irritants and roadblocks in this journey. However, despite all the roadblocks that the country’s entrepreneurial ecosystem faces today, India has set itself on the path to playing the role of an economic powerhouse in the world order today, According to an S&P Global report, India is projected to become the third largest economy in the world by 2030.
