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Emerging Entrepreneurial Ecosystem in India

S Ramdorai
Wednesday, April 2, 2008
S Ramdorai
It is a myth that entrepreneurship or entrepreneurial skills are limited to those people starting companies. I believe entrepreneurship is an outlook; an outlook which, when combined with entrepreneurial skills, helps people succeed in endeavors across all dimensions. So, you could be with a large enterprise or an NGO and yet be entrepreneurial. I will deal with both this traditional and broader meanings of the term.

If we were to look around us, the entrepreneurial mindset is widespread in India, especially in sectors such as retail, we have over 13 million shops in the country, 78 percent of which are family owned. However, the sector is fragmented and has issues of scale, and does not have a supporting ecosystem. The U.S. economy, as we all know, is primarily entrepreneurial; as a matter of interest, VC-backed companies represent 17 percent of their GDP and generate over 10 million jobs. Every year over one million new companies are started in the U.S., almost 50 percent of them fail the very first year and 40 percent just survive for five years. The important point is that failure is accepted as a natural part of the process and is not viewed as a dead end.

It is an economic truth that in order to create wealth the economy must create jobs which, in turn, are fuelled by entrepreneurial activity that needs a supportive regulative environment, venture capital activity, and a strong capital market. A recent McKinsey-Nasscom report estimates that India needs at least 8,000 new businesses to achieve its target of building a $87 billion IT sector by 2008.

The success of the Silicon Valley Indians - the many millionaires it created - has helped change the Indian mindset towards entrepreneurship. Traditionally a high school education was followed by a university degree and then a job with a large company with whom you stayed till retirement. Only if you were born into a business family were you likely to be an entrepreneur. However today this model has changed. A university degree may well be followed by some practical experience, management training, and a stint at a firm. With this exposure to the world of business we see many Indians now setting up their own ventures which, if unsuccessful, would lead to another venture and hopefully never really retire.

Entrepreneurship has earned a newfound respect in our country
This is a good sign for us to maintain the nine percent growth we talk about: we must create jobs and while the government can only play facilitator, the education system, especially our universities together with the industry must nurture the required ecosystem. Education needs to adapt its curriculum to encourage entrepreneurial skill sets right from high school onwards. Opportunity evaluation, risk taking, raising and leveraging resources, communications, and sales are survival skills; and these cannot be imbibed through an intensive dose later in life. If students are given opportunities to practice these skills in the relatively safe and risk-free environment of an academic institute, young people, when they do start ventures, will have higher chances of success.

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