Start-ups at the heart of economic growth in India
Giving up his job as vice president at a Mumbai-based investment bank to pursue his entrepreneurial ambitions and set up a travel website, was a huge decision for Navin Sharma.
“Leaving the comfort and security of a job to plunge into something new is always a big risk,” says Mr Sharma, 35, who made the career decision this year. “Being an entrepreneur is tough anywhere in the world and more so in India.”
India’s economic growth slowed to a decade low of 4.5 per cent in the financial year which ended in March last year and experts say that encouraging entrepreneurship in India could boost the country’s economic growth and job creation.
However, experts and entrepreneurs agree more needs to be done to encourage new ventures.
“While the very visible success of some recent web-based companies has changed public perception of start-ups to a certain extent, attempting to do something completely new is not always met with encouragement,” adds Mr Sharma, who is from Lucknow in north India but has been based in Mumbai for the past four years.
“An ecosystem geared towards fostering start-ups vis-à-vis Silicon Valley has not quite developed in India. There are multiple incubator programmes and seed funds in the country now but the output is nowhere as prolific in numbers or quality as it could be.”
So far, Mr Sharma has invested thousands of dollars of his own cash into the website, eventraveler.com, which is under development and will offer users a platform to plan a trip to a major sports or music event anywhere in the world.
Sanjeev Malhotra, an entrepreneur and the founder of Alia Group, a marketing services company based in Mumbai, says there are several factors in India that work against aspiring entrepreneurs right from the outset.
“When anybody wants to start off on a path of entrepreneurship — whether you’re a young teenager wanting to start out or an old retirement guy who wants to do something on his own — cities like Bombay and Bangalore give you that opportunity, otherwise the typical entrepreneur is faced with so many challenges.” However, he adds that what those two cities have to offer is “still nowhere close to what is really needed” for aspiring entrepreneurs.
“Let’s talk of a young kid starting out — his family’s against him. We’re risk-averse, extremely god-fearing. Imagine how this gets into the psyche of the guy who’s starting. More often than not the father of the family wants them to go on the path which they believe us right,” he says, adding that these cultural challenges mean many Indians with great entrepreneurial potential are “non-starters”.
Funding is a “major challenge” and if entrepreneurs do manage to raise funding, often their investors would give the venture only about five years to succeed, whereas the process of setting something up in India can often take much longer, he says.
Mr Malhotra adds that India lacks innovation, so there also needs to be a shift in the nation’s mindset.
“Our innovation is to copy,” he says. “Our innovation is not to create something new. It requires every stakeholder to come into this — government first of all. If the government just sets up in their mind that they want to back entrepreneurship, it would send out such a strong signal. Can we set up zones where entrepreneurs thrive? Even if someone wants to form a company, they don’t know who to go to.”
Others agree that India needs to do much more to nurture entrepreneurship at a government level.
“Entrepreneurs have to substitute for the Indian state by generating their own power, providing their own transport, digging for their own water, arranging their own security and manufacturing their own employees,” says Rituparna Chakraborty, the senior vice president and co-founder of TeamLease Services, a staffing solutions company in India. “This not only raises the difficulty level for young people becoming entrepreneurs but ensures that most Indian companies end up being dwarfs rather than babies. The average size of an Indian company is three employees and the policy focus for the ministry of micro, small and medium enterprises, unfortunately, continues to be small companies rather than new ones.”
With the BJP’s landslide victory in India’s election, Ananth Rao, the chairman of SkillPro, a vocational training company, says he hopes the new government will “support entrepreneurship and facilitate incubation, financing and other policies to fuel growth through private players.
“In most countries, 60 per cent of new jobs comes from new companies,” he says. “India needs to embrace new companies by supporting entrepreneurs.”
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Published: May 18, 2014 04:00 AM