Entrepreneurship in India: 7 Reasons Why it is Important 2022
India has many exemplary people who accomplished remarkable deeds with energy, enthusiasm, risk, and patience. They not only made their destiny but also created a country’s fortune. Today we look at why entrepreneurship in India is important for the coming years.
Don’t look back, forward – infinite energy, infinite enthusiasm, infinite daring, and infinite patience – then alone can great deeds be accomplished.
said Swamy Vivekananda, the great Indian spiritual leader.
From Jamsetji Tata – the founder of Tata Group of pre-independence era, Narayana Murty – co-founder of Infosys, present-day information technology company, to Bhavish Agarwal – co-founder of Ola cabs and Ritesh Agarwal of Oyo Rooms, the internet-age companies – have changed the face of India by nurturing never tried ideas into big businesses.
They all are celebrated entrepreneurs of India. Swimming through the ups and downs of the business world, they rose to notable positions. Their success stories have been leading India’s success.
If so, who is an entrepreneur, and what entrepreneurship is all about?
Who is an Entrepreneur?
Entrepreneur originated from the French word entreprendre, which signifies, to set on something. Going by the definition of Dictionary.com, an entrepreneur is, “a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk.”
Dwelling into the meaning, an entrepreneur can be regarded as one who,
- Initiates a new business/service /procedure
- Innovates new entrepreneurial ideas
- Discovers business opportunities
- Organizes and take things forward
- Takes risks and challenges
- Drives and inspires others
In the Indian entrepreneurs’ scenario, Jamsetji Tata is considered the pioneer of the Indian industry. He laid the foundation for industrial culture in India, with a vision to place India among other Industrialized nations. When India was under colonial rule, Jamsetji set out to enter the business segment dominated by the British.
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Entrepreneurship in India: Modern Indian History – A Brief of Jamsetji Tata
Jamsetji Tata was born in 1839 to Jeevanbai and Nusserwanji Tata, who hail from the Parsi Zoroastrian priest family. Unlike his earlier generations who followed the priesthood, Jamsetji’s father shifted his occupation to business. He moved to Mumbai seeking business opportunities and set up an export trading firm there.
Jamsetji, as a child, inherited a shrewd understanding of the business from his father. After graduating as a green scholar from Elphinstone College, he joined his father’s business. However, it was the time when the British held in 1857 revolt and unrest prevailed across India.
Amidst tough conditions, Jamsetji began his entrepreneurial journey. Nusserwanji Tata wanted to scale up his business and Jamsetji took over this task. Jamsetji visited Hong Kong, China, and Japan to expand and consolidate the existing business.
Commencement of Tata’s Business
In 1868, after attaining adequate business experience, Jamsetji started his own trading company. During his travels, he realized that the textiles segment poses a huge potential for success.
Subsequently, he bought a bankrupt oil mill and turned it into the cotton mill – called Alexandra Mill, for producing cotton textiles. Two years later, Alexandra mill was sold at a considerable profit.
To further the knowledge of the textile business, Jamsetji visited England and examined the way people were employed, machines were used and the quality of fabric produced at Lancashire cotton mills.
Jamsetji discovered that he can be a tough contender for the British in the textile business. India was a leader in the textile industry before colonial masters exploited it for their advantage.
Jamsetji aspired to produce the finest fabric in India. He wanted to reduce textile imports by making the country self-sufficient. All his efforts were channelized towards this objective.
In 1874, in line with his vision, Jamsetji came up with Central India Spinning, Weaving, and Manufacturing Company.
He chooses Nagpur for setting up a textile mill analyzing the advantage it holds in terms of handiness to raw material (cotton), continuity of production, and accessibility to transportation.
Naming the mill as Empress Mills, the operations began on the day Queen Victoria was crowned Empress of India. Empress Mills created employment for people around.
Prioritizing Workers Welfare
At the time when workers were exploited in factories of the east, Jamestji ensured workers’ welfare as his top priority. It was Tata who pioneered the labor welfare initiatives in India like medical facilities, provident funds, accident compensation, shorter working timings, and so on.
In his words,
we do not claim to be more unselfish, more generous and more philanthropic than other people. But we think we started on sound and straightforward business principles, considering the interest of shareholders our own, and the health and welfare of the employees the sure foundation of our prosperity.
In the coming years, more cotton mills were opened – Advance Mills in Ahmedabad and Swadeshi Mills in Mumbai. Swadeshi Mill was named in support of the ongoing Swadeshi Movement in India. These mills had top-end machinery and were producing high-quality cotton.
Diversification of Business
The entrepreneurial quest in him did not stop here. During one of his expeditions, the idea of establishing a world-class steel plant in India was born. But the colonized Indian environment and bureaucratic conditions prevailing then made the dream of a steel plant a daunting task.
Nevertheless, Jamsetji started his preliminary work for the steel plant after choosing village Sakchi across the Subernarekha river, for his project. Dr. Charles Page Perin, a consulting engineer from the US was approached for shaping up the steel venture.
Parallelly, Jamsetji also dreamt of a township for workers of the steel plant with good amenities.
Jamsetji was also instrumental in setting up the Indian Institute of Science – IIS, by funding Rs.30 lakhs, which is now located in Bengaluru. He believed that laying a foundation for educational institutes and research centers would help in nurturing scientists and engineers for building progressive India.
Another significant milestone of Jamsetji’s timeline that needs special mention is The Taj Mahal Hotel of Mumbai, the most luxurious one even today. The Taj was very dear to his heart and was the first building with electricity way back. It was filled with items purchased from western countries like American fans, German lifts, and so on.
In 1904, before his dream of a steel plant could realize, Jamsetji became seriously ill and breathed his last. However, his vision was taken forward by his son Dorabji Tata and cousin RD Tata.
The Tata steel plant began production in 1912. The model town envisioned by him took shape as Jamshedpur, the steel city of India which is now located in Jharkhand state.
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Today, Tata Group is a global company spanning across ten sectors, including information technology, consumer and retail, automotive, infrastructure, financial services, aerospace and defense, tourism and travel, telecom and media, and trading and investments.
Aligning with the values and business ethics of its founding father, Tata Group continues to run on five core values of integrity, responsibility, excellence, pioneering, and unity. The group companies are owned and promoted by Tata Sons. Tata Sons is in turn held by philanthropic trusts with 66% of its equity shares belonging to these trusts.
Over the years, Tata Group’s businesses expanded globally and are now operational in 100 countries over 6 continents, with an employee base of 7,20,000. The revenue of Tata companies combinedly stood at Rs. 7,92,710 crores in 2018-19.
Tata’s contribution to the Indian economy is enormous. In 2017, Tata companies contributed Rs.47,196 crores in taxes against Rs.21,08,118 crore of India’s finances.
Ujjwal Mathur, India business head at Tata Consultancy Services said,
We have been instrumental in running the economic backbone of the country, covering the stock exchange, the regulators, the depositaries, manufacturing, retail, utilities — that is what our expanse is, Our internal assessment is that we touch the lives of one in every two citizens of the country.
Tata Group is undoubtedly a jewel in the crown of the Indian Industry, with its robust presence and inspirational business success. Tata’s socially responsible business practices have always set the standard in the Indian business landscape. The Groups’ visionary leaders have invariably been the driving force behind shaping it into a rich enterprise.
Entrepreneurship in India – Post-Independence Era
Post-independence, India chose a mixed economy, with the state playing a dominant role in the industry. Major industries were under the public sector and private players comprised in the consumer goods sector. Even these private players were highly regulated and controlled through government policies.
The ease of doing business was very low with high government intervention. In other words, conditions for nurturing entrepreneurship were gloomy.
However, a series of reforms carried out in 1991 gave huge encouragement to entrepreneurial ventures. The Indian industry set out in a new direction exploring entrepreneurial talent across diverse backgrounds.
Unlike earlier where business families dominated entrepreneurial space, people from all walks of life embarked into the business. Many visionary entrepreneurs began writing their growth stories.
On the other hand, India’s growth story was interwoven with entrepreneurial success stories.
7 Reasons Why Entrepreneurship in India Is Important
As per the Economic Survey, 2019-20 entrepreneurship is viewed as “a strategy to fuel productivity growth and wealth creation.” As per the World Bank, India takes the third position globally for entrepreneurship.
The number of new businesses increased rampantly since 2014. The cumulative annual growth rate of new firms is 12.2% between 2014-18 over 3.8% between 2006-14.
Let us understand in detail why entrepreneurship in India holds so much significance.
Entrepreneur In India will boost the capital formation
What is capital formation?
Capital formation means enhancing capital goods such as machinery, equipment, materials, electricity, transport equipment, and so on. Capital goods are necessary to continue the process of production. More production can lead to an increase in national income. That means capital formation is directly proportionate to national income.
How does capital formation happen?
Capital formation takes place with saving and investment activity. The amount saved by individuals is mobilized by entrepreneurs, through capital markets.
The shares and securities bought by investors, financial institutions, and so on enable businesses to raise funds. These funds are invested in real capital. The entrepreneur may take risks by making investments in innovative products and improve production activity.
As such, the entrepreneur plays an important role in capital formation and wealth creation. A country’s economy and development are dependent on its entrepreneurs and entrepreneurial activities.
As observed in the case of Tata Group, its massive scale of operations, revenue generation, and tax payments directly contribute to the Indian economy and industrial development.
Entrepreneur In India will push for innovations
There is no wonder in saying that entrepreneurs and innovation are inseparable. An entrepreneur always strives to bring out new ways of doing something better. Be it introducing or improving a product or service, technological advancement, changes at production or distribution front, and so forth.
An entrepreneurial idea can be as simple as addressing a small problem prevailing at a point in time.
Predominantly, innovation is spurred by factors like competition, changing customer tastes and expectations, and of course reforms and liberal regulations at the government front.
Competition and Innovation
For an enterprise to thrive in cut-throat competition, it must constantly innovate. An entrepreneur invariably innovates to grow over established businesses. At times the innovations can be disruptive, surpassing the existing businesses, markets, and products.
For example, Reliance Jio took the Indian telecom industry by storm with its offers and prices, to drastically increase its customer base under 4G services. This is a simple yet disruptive innovation from Reliance.
Customer and Innovation
Customer is key for any business. Catering to the changing demands of customers and meeting their expectations has become the order of the day.
For example, Godrej has developed a low-cost refrigerator for rural women called ChotuKool understanding the problems of rural households. Chotukool was designed as per rural customer needs – a fridge that can store limited quantities, a less pricey one, and durable under power shortages.
Reforms and Innovation
The liberalization of the economy in 1991 gave a big boost to entrepreneurs in India. The first-generation entrepreneurs bloomed grabbing the business opportunities created by reforms like the end of License Raj, policy for ease of conducting business, tax rationalization, and so on.
Another significant aspect of liberalization is the increase in innovations and Research and Development (R&D). The biotechnology industry is a classic example of this wave. Start-ups from biopharma and bio-Agri sectors manifolded with innovation as key for better offerings.
Entrepreneur in India will open up new employment opportunities
Although the entrepreneur sets up a business, resources are required for operating it. People form an important resource/asset to any business. Entrepreneur employs people for running his organization.
People are employed for performing various functions within an organization. As such, he is opening new employment opportunities.
An entrepreneur is creating jobs by establishing a business and by expanding it as well. As the business grows, both direct and indirect jobs are created. Indirect jobs are created by expanding vendor and supplier base as part of the expansion.
Economic development can majorly take place by curbing the unemployment problem. As such the role of the entrepreneur forms vital in this aspect.
As discussed earlier, Tata Group has 7,20,000 people working for various companies under its umbrella. Such large-scale employment mitigates the burden of employment generation on the government.
Entrepreneurship in India will improve the quality of life
Enhancing the standard of living is a result of entrepreneurship. The innovations driven to produce large-scale goods and services at low cost, make the products affordable. The availability of quality goods at affordable prices naturally improves the standard of life.
For example, Piramal Water Pvt Ltd., to provide safe drinking water at affordable prices came up with the Sarvajal initiative.
Water ATMs’ were installed in rural areas of states like Rajasthan, Gujarat, Maharashtra, and a few more. People with prepaid water cards buy drinking water at 30 paise per liter. Safe drinking water at low prices improves the health and life quality of rural households.
Entrepreneurship in India will spur exports
An increase in production activity, not only meets internal demand but also enables exports. Exports reduce trade imbalances and improve foreign currency reserves. Government backing in the form of incentives and subsidies, marketing assistance, Special Economic Zones (SEZs) enable entrepreneurs’ export orientation.
For example, the Indian handicraft industry has over 7 million artisans manufacturing handicrafts across the country. More than 67,000 export houses are catering to the internal market and exporting to countries like the US, UK, UAE, Germany, France, and so on. Handicrafts form a significant portion of total Indian exports.
Entrepreneurship In India will attract Foreign Direct Investments
Potential entrepreneurial ideas attract inventors across the globe. Especially in India, the growth of startups is very encouraging. The global inventors are showing interest to invest in Indian startups believing in their prospects.
Of course, the government plays a dominant role in regulating FDIs. However, in recent years to give a push for startups Indian government has liberalized norms. As such, several unicorns like Byju’s, Zomato, Paytm, BigBasket, and so on are foreign-funded. It was estimated that China alone invested $4 billion in Indian startups.
Entrepreneurship In India will give back for the betterment
Entrepreneurs engage in philanthropic activities and give back to society. They support social causes, engage in building a better community by supporting education, skill training, women welfare, health care, and so on.
The betterment of the community along with education and skill improvement acts as a catalyst for nurturing new entrepreneurial minds and spur new ventures.
For example, Shiv Nadar, the chairman of HCL Technologies, through the Shiv Nadar Foundation is supporting education in rural areas and nurturing the talents of underprivileged children through free education and scholarships.
Similarly, Azim Premji Foundation, from Wipro’s chairman Azim Premji, also works towards improving elementary education in rural areas. Azim Premji is one of the top philanthropists globally.