Some entrepreneurs came into limelight recently with their big success stories. The small number of these big success stories in entrepreneurship gives a feeling that entrepreneurship is new in India. There could be nothing further than the truth.
The reality check – Is entrepreneurship new?
From the independence period, self-employment existed as #1 employer in India. A sheer need to survive forced many into self-employment and subsistence entrepreneurship, which means a hand-to-mouth business earning less than required for basic existence. Almost every type of major employment from farming, LIC agencies, grocery stores, fruit vendor, auto rickshaw, electrician, plumber, carpenter, hair cutter, and beauty saloon is self-employment. Low per capita income countries typically tend to have many self-employed people, whereas thriving economies have more people working as employees.
Beyond the Hype – Why is entrepreneurship so high in India since independence?
Entrepreneurship is very high in India for many social, political and economic reasons. Also, most agrarian economies have high self-employment and a significant non-professional workforce in low paying jobs. The creation of a viable middle class requires at least an industrial economy.
Very few government jobs
After independence, a limited number of public sector companies existed as government of India was still in the process of building PSUs. As a result, there were very few government jobs, which existed in India after independence. In addition, there were few private sector companies that existed in India after independence. This scarcity of jobs for educated persons led to forced self-employment.
No meaningful jobs in traditional businesses
There were no meaningful jobs for educated persons in traditional businesses in the post independence period. Traditional businesses do not operate in a professional manner and the environment in such businesses is typically not conducive to educated people.
Farming mindset fueled entrepreneurship aspirations
A farmer has a tendency to be one’s own boss. A farmer does not work for others. In many parts of India, the rural hired hand is called “salaried” and the term “salaried” has a negative connotation; it means someone who is not enterprising, unskilled person from a not so great family background. A typical farmer’s mentality is to take pride in being independent and self-employed. For generations, this mindset continued and fueled entrepreneurship aspirations.
Private sector prior to 1991 reforms was not actively encouraged
Private sector in India before the 1990’s faced many bureaucratic hurdles, thus it did not grow fast enough to create jobs for the people seeking employment. During 1950-91 due to industrial licensing / socialistic agendas, private sector was not actively encouraged and had stunted growth. The government itself did not consider the private industry very kindly. People could understand the mood of the government and did not want to join private sector as everyday could be an uphill journey against the might of the government bureaucracy / prevailing public opinion. This environment affected growth of professional private businesses and led to insufficient job creation in the private sector.
If you see the movies of Amitabh Bachchan in 70’s and 80’s when he was Bollywood superstar, the common theme was the lack of meaningful jobs in educated India. The frustration of the educated Indian and the role of the angry young man played by Amitabh Bachchan strongly connected with the audience and made him a super star. The common scene in many movies of this time was the educated person holding a degree and roaming from office to office for a job till his boots get holes in them.
Inability to work in organizations
In the earlier generations people were mostly into self-employment, which mostly didn’t required any interpersonal skills and awareness levels of teamwork. The younger generation grew up seeing this generation. Even if the younger people aspired to join PSUs and private sector jobs, they lacked the interpersonal skills and awareness levels to get and keep the job in such organizations. Their inability to get adjusted to work in teams made many educated people unfit to work in organizations. This also led many people to get into forced self-employment.
However, the real development in India is the growth of decent paying, good profile jobs in professional private sector companies. Many multinational companies also entered the Indian market and tens of lakhs of respectable jobs have been created. Contrary to what is the general perception, the reality is that it is not the growth of entrepreneurship that we are seeing today. The reality is the aggressiveness and the determination with which Indians have let go off the self-employment mindset to join the professional work force as employees.
In fact, this trend is such a strong trend that currently the professional employees and corporate taxes (mostly from PSU’s and professional private companies) account for more than 50% of the taxes collected by the Indian government.
Smeph.net is a website about Small and Medium Entity Promotion in Hyderabad that contains exclusive articles, webinars, white papers & latest industrial updates to support and guide professional SMEs run their businesses successfully. The SME Resource Center has comprehensive collection of articles covering expertise information for small and medium businesses.