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‘The Entrepreneurship Imperative’

Monday, July 02, 2012

Addressing a galaxy of business leaders from across the world, Vijay Kalantri  Vice Chairman, World Trade Centre (WTC) Mumbai and President AIAI, chaired an important session  ‘The Entrepreneurship Imperative’ organized by Horasis Global India Business Meet at Antwerp in Belgium, last week. Here is what he had to say on the India growth story as also the changing face of Entrepreneurship across the globe. Excerpts…

At the outset, I would like to thank Horasis, for giving the WTC Mumbai and the AIAI, an opportunity to join this unique event as co-organisers. I am also thankful to them for giving me the opportunity to Chair this important Session on “The Entrepreneurship Imperative”, in this Conference, which comprises a galaxy of business leaders from all over the world…

Over the last decade Indian economy has not only been the Second Fastest-growing Economy in the world, it is also increasingly perceived to be a major player in Global Trade and Investment-scenario. Over the last 8 years, Indian economy has displayed average annual GDP-growth of over 8%, and India’s GDP-value today is estimated at $ 1.6 Trillion, making it the 3rdlargest economy in terms of PPP, surpassing even Japan and Germany.

Indian business and industry have exhibited enormous resilience, dynamism and strength over recent years, to acquire their rightful place alongwith the global industrial greats.  Indian industry has become far more globally competitive, cost-efficient, energy-saving and environment-friendly, than what it was just about 10 – 15 years back.

They have also become major investors abroad and many corporate have bought over overseas corporations – much bigger than their own size.  Indian IT industry of course has been recognized the world-over, but even in the key manufacturing sectors such as – Engineering, Auto, Pharma – amongst others – Indian firms have made an indelible mark and created a niche for themselves.

Indian companies have increasingly adapted themselves to the fast-changing dynamics of Global Trade, and have diversified their export-baskets and have also conquered new export-markets.  In recent years, our new and growing export-destinations include – China, UAE, Africa, and Latin America – in addition to the traditional markets of USA and Europe.

The vigor, dynamism and growth achieved by India’s SME sector in the last two decades have been commendable. SMEs are truly the backbone of Indian economy, contributing more than 45% to India’s exports and the biggest source of non-agricultural employment. SMEs have prospered by operating in almost all sectors of Manufacturing as well as Services. They are no more concentrated in Metros, but are spreading in various two-tier cities, and even in many rural areas or regions. “SME Clusters” have become a major tool for rapid growth of localized industries as well as local employment. Many Venture Capital (VC) funds as well as Private Equity funds have also been investing into the ideas and potential of Indian SME-sector.

However, Indian economy and industry do confront certain formidable challenges, which need to be overcome by the policy-makers and other stakeholders, to enable Indian industry to continue to be globally competitive, and also to generate wealth, exports and employment for India.

crucial challenges Infrastructure
The Energy and Transport sectors today face daunting challenges.  While Public Sector investment in – Electricity, Civil Aviation, Roads and Highways, Ports etc., has its own problems of inadequate finance and others, the much-needed private investment, has not made the desired headway due to lack of appropriate and investor-friendly policy framework, procedural ease and regulatory framework for long-term financing.

Skill-Deficit
This is emerging as a very critical issue for Indian industry, as our Higher and Technical Education system is not generating the quality and level of youth which is immediately and directly employable by the modern-day industry.  The high-end Service sectors like: IT, BT, Insurance, Retail, Tourism as also many segments in manufacturing – are today facing the problem of lack of rained/skilled personnel. However, today many initiatives are being undertaken by Private Corporate sector to impart skills and training to young students, so that they could be directly absorbed in these industries themselves. Govt of India is also attaching highest priority to skill development through Public-Private Partnerships.

Ease of Doing Business
India still ranks low in the World-Bank’s “Ease of Doing Business” indicator.  Our policies and procedures are still very time-consuming, cumbersome and sometimes act as an obstacle for investors and especially for the SME-sector.

Lack of co-ordination among the concerned Government Agencies or between the relevant Central and State Ministries – also adds to the ‘time and cost over-run’ for businesses. Policy-consistency is another major requirement from domestic as well as foreign investors.  Once the policy is declared, it is expected that the Government of the day strictly adheres to the same.  This inspires investor-confidence to undertake and implement huge investment-projects.
 
Entrepreneurship, the Key to ‘Inclusive Growth’
One of the greatest factors contributing significantly to India’s industrial progress over last 150–200 years is the tradition of ‘entrepreneurship’ and particularly “private enterprise” – be it small or big – thriving throughout the length and breadth of India.  There have been millions of Entrepreneurs and their tribe is growing, and diversifying – across different sectors and regions.

Today, India has entrepreneurs in virtually every sector of the economy: Infrastructure, Manufacturing, All types of services – IT, BT, Tourism – Hospitality, Banking, Insurance, Entertainment and Media, Warehousing and many other hitherto – unimaginable fields.

As regards the “inclusiveness” aspect, Entrepreneurs have entered the Agricultural sector as well.  A new class of “agri-entrepreneurs” is also emerging steadily in many rural areas.  While some of them are undertaking “Medicinal Tourism”, “Agro-Tourism”, “Floriculture”, “Tissue culture” etc., in a big way, many farmers are making many innovative experiments in traditional farming and especially in horticulture – fruits and vegetables.

The post-1991 Policy changes heralded a new era unleashing Privatisation, Liberalisation and Globalisation.  With the unleashing of the “animal spirits”, the Indian entrepreneurs began to emerge.

Another pointer is the emergence of “first-generation entrepreneurs” in many sectors – especially in service-industries.  Equally important, is the growing number and presence of “Women-Entrepreneurs”, in many high-tech and high-end manufacturing, finance and technology areas.
 
Global Entrepreneurship
 ‘Entrepreneurship’ has become the driving force of industrial development throughout the world today.  In fact, in today’s world of global economic crisis, many experts are laying heavy emphasis on “promotion of entrepreneurship”, to combat the crisis.  A recent OECD study points out, that although the business ‘start-up’ rates had fallen sharply post-2008 in all OECD countries, and the momentum slowed again in early-2011, there are now some signs of a pick-up in new business activities.

 Given the unprecedented magnitude of Global Youth Unemployment - currently estimated at about a staggering75 million jobless youth, – entrepreneurship is a key solution to this grave and accentuating problem.

However, the Entrepreneur as well as the SMEs – do face daunting challenges in terms of ‘access to cheap finance’, ‘markets’ ‘ever-growing local and global competition’, etc.  In fact, there is evidence to indicate that the world-wide credit-crunch has been ‘tougher for the SMEs than for large companies’ (OECD): the SMEs asking for loans between 2007–2010, faced higher interest-rates, shortened maturities, higher demands for collaterals and generally stricter loan conditions..!

Recognizing that Entrepreneurs (and SMEs) are a great force in economic development, wealth-creation and inclusiveness through social cohesion, may global institutions such as the OECD, ILO, World Bank, UN etc., have been advocating various Policy measures which are common to all Governments across many developed and developing countries:

  •     An enabling business environment – easier access to finance and credit
  •     Devising and designing successful “youth entrepreneurship programs” – in partnership with Private sector, introducing entrepreneurship as part of curricula in early stages
  •     Facilitating and Improving access of micro-enterprises to ‘public procurement’
  •     Enabling the transition of young entrepreneurs in the ‘informal sectors’ to ‘formal sectors’, by promoting and supporting compliance
  •     Improved Fundamentals such as: macro-economic stability, health and education and public infrastructure;

A Learning Process…
In today’s globalised and highly interdependent world, doing business is a complex and dynamic process, involving continuous learning and unlearning, redoing and restructuring of processes, organizations and technologies.

 Indian Entrepreneurship has steadily begun to make its mark on the global industrial scene. However, we are aware that our start-ups need to adapt themselves to the fast-changing environment. They will have to do this by learning New Technologies, adopting the latest Quality Standards and Benchmarks, and by observing strict Time and Cost schedules in delivering value…

In turn, the Indian breed of entrepreneurs also has some specific things to offer to their global counterparts. Whether in towns or villages, the Indian entrepreneur has developed a remarkable ability to survive and prosper, and generate wealth in very adverse circumstances, - a fact - which is globally recognized as exemplary…This mutually beneficial exchange among the widely spread out entrepreneurs, is the key to the rapid, sustainable and inclusive industrial growth in the years to come.

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