Building an entrepreneurial ecosystem in India
Development, industrialization and jobs are intrinsically linked to entrepreneurship
 
The Narendra Modi government completed one year in office on Monday (May 25). One of the centerpieces of why the BJP-led NDA dispensation came to power was is its focus on development and governance.
 
Development, industrialization and jobs are intrinsically linked to entrepreneurship. The greater the number of entrepreneurs in a society the greater are the chances of prosperity for the people residing in it. Entrepreneurship is critical as it also leads to innovation, betterment in the quality of life and greater social progress within a society. 
 
While it is worthwhile to notice that the present government has for the first time introduced a Ministry of Entrepreneurship (with Skill Development), the fact remains that India’s record is at best poor at nurturing entrepreneurs and creating an entrepreneurial ecosystem. Can the present government dream of creating the next Silicon Valley? That would require taking stock of the present reality in the entrepreneurial space necessary for betting conditions in the future. India’s position on global indices as well on several other indicators of entrepreneurship at present is alarming. Though the present government is taking steps to better some of these, the approach seems to be piecemeal. 
 
The GEI (Global Entrepreneurship Index 2015) places India at a dismal 104th rank below all the BRICS economies that stood thus (China-61, Russia-70, Brazil-100). The best-performing country on the Index is unsurprisingly, the US. On the three pillars too which make up the composite index, India performs relatively better on Entrepreneurial Attitude pillar, (95), at an average level on the Entrepreneurial Aspiration pillar (104) and relatively poorly on the Entrepreneurial Ability pillar (107). 
 
Another major study undertaken in 2013, on Indian entrepreneurship is The Global Entrepreneurship Monitor (GEM). It pointed out that the entrepreneurial attitude (particularly on viewing entrepreneurship as a desirable career choice), relatively speaking with other BRICS economies was low in India. Only 61 percentof the adults in the sample (in the age bracket of 18-64) looked at entrepreneurship as a desirable career option. The figure was 70 percent in BRICs economies and 77 percent in factor-driven economies. 
 
Also, the same study used a measure of total TEA - Total Early Stage Entrepreneurial Activity. This is described in the study as the percentage of individuals in the sample age between 18 and 64 years who are in the process of either starting a new business or have recently started one. India performed relatively poorly on this measure in comparison to other BRICS countries, with only Russia behind it. 
 
The data in enterprise surveys from the World Bank reveals an interesting story. The new firm density described by the enterprise surveys as number of new corporations created per 1,000 working age (16-64 years) individuals is found to be dismally low in India. On an average, we create 288 times less number of corporations per 1,000 working age individuals as compared to Hong Kong. In absolute numbers too, cumulatively from a period of 2004-12 the newly registered corporations were lesser in India than much smaller places like Hong Kong. 
 
It brings one to a related issue of clusters and why India has faltered in a coherent cluster approach that enables enterprise creation. The fact that exports from the country have not been able to keep pace with the imports points to rising domestic demand. In addition, it also points to a failure on the part of India to ‘make’ and equally importantly ‘market’ our goods and services well in the global economy. While Indians (at least some of them) prefer to buy Italian leather shoes, the fact that we do not have companies/shoemakers in Agra selling at half the price shows our inability to market our products well. 
 
A place where we have been able to do relatively well is the IT/ITeS segment with $98 billion exports in 2014-15. However, the fact remains in most export segments we have languished. The thrust on Make in India is thus understandable. Augmentation of large corporations with the development of MSME clusters, especially with newer enterprises and entrepreneurs, will go a long way in bettering prospects for the future. It will bring not only jobs but also raise the standard of living of some one million people that will enter the workforce every month for the coming decade. 
 
It is worthwhile to keep in mind that Silicon Valley as a cluster arose out of specific historical developments in time (like access to VC capital, Stanford’s Institutional support, US defense spending). However a similar if not same ecosystem can be nurtured in the Indian context. It would require the following key elements:
 
* Education: Educational institutions that enable independent thinking and foster risk taking in students.
 
* Funding: India is a fairly nascent market with respect to angel investments and VCs, equivalent to approximately $1 billion annually at present. This will have to be considerably expanded. 
 
* Technology development: To be done by talented and educated individuals.
 
* Access to Infrastructure: Include basic requirements like power supply, land, the internet, et al.
 
* Social and cultural support: For taking failure as a part of the learning curve and a stepping-stone to success.
 
* Better Regulations: In ease of setting up and winding a formal business. 
 
* Stringent IP protection regime: For the protection of entrepreneurs against larger players.
 
* Trust, teamwork and a spirit of collaboration: Among institutions, networks, and people. 
 
The present scenario throws up some fundamental questions about the basis of entrepreneurship? In our view, specialization, innovation and marketing (SIM) should be the basis of entrepreneurship that would drive more value creation in the Indian context. Newer business models that focus on society, scale and simplicity would better the outcomes for India in the future. 
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How goats, chicken have lifted households out of poverty
Apart from India, the graduation model was tested in Ethiopia, Ghana, Honduras, Pakistan and Peru by researchers from the Abdul Latif Jameel Poverty Action Lab (J-PAL) of the Massachusetts Institute of Technology (MIT) in Boston, US
 
Some interventions in day-to-day living have led to a 15 percent increase in assets, 26 percent growth in consumption and 96 percent rise in savings among the ultra-poor, or those with no assets, in India, according to a new six-country study that followed the lives of 21,000 of the world's poorest people.
 
Examples: A chicken, goat or a similar productive asset. Goods such as betel leaves and vegetables for a small shop. Training on using such assets. Money to reduce incentives to sell assets in an emergency. Frequent personal mentoring or coaching. Health education. Savings services for between 18 and 24 months.
 
These interventions follow what is called the "graduation model", a programme that endeavours to help the poorest people upward and out of poverty, and could have seminal implications for Prime Minister Narendra Modi’s government, as it attempts to move from costlier, broad subsidies to clearly-targeted interventions.
 
Apart from India, the graduation model was tested in Ethiopia, Ghana, Honduras, Pakistan and Peru by researchers from the Abdul Latif Jameel Poverty Action Lab (J-PAL) of the Massachusetts Institute of Technology (MIT) in Boston, US.
 
“The programme’s approach differs from that of micro-credit or self-help groups as households are not required to repay the asset cost. Further, the training and intensive hand-holding helps beneficiaries fully benefit from their chosen self-employment activities,” according to economist Abhijit Banerjee, J-PAL founder, and one of the researchers.
 
Micro-credit programmes tend to serve those just below, or even above, the poverty line, typically excluding the poorest. In India, it has meant a 433 percent return on investment
 
The J-PAL research in India was carried out in West Bengal by Bandhan-Konnagar, the not-for-profit arm of Bandhan Financial Services and offered a 433 percent return on investment.
 
“We gave [a] stipend for a year and provided support for 18-24 months. The per beneficiary cost worked out to Rs 20,000-25,000, with 70 percent spent on the asset and stipend, 10 percent on training and 20 percent on managing and monitoring the project for two years,” said Shekhar Ghosh, chairman of Bandhan Financial Services.
 
Those in the programme group had significantly more assets and savings, spent more time working, went hungry on fewer days and experienced lower levels of stress and improved physical health, said Ghosh.
 
Across the six countries, researchers tracked 10,495 households to test the graduation approach. Researchers used a “randomised controlled-trial methodology”, in which they tracked people invited to participate in the two-year programme and a similar group that was not, and compared how their lives changed up to a year after the programme ended.
 
The researchers found that the beneficiaries, after the third year, had significantly more assets and savings, spent more time working, went hungry on fewer days and experienced lower levels of stress and improved physical health.
 
Vast anti-poverty apparatus have given a miss to India’s excluded people. The cuntry has almost 216 million people, or 43 million households, with no assets, as IndiaSpend has reported. Of those with zero assets, nearly 80 million people-the population of Germany-or 16 million households are Adivasis.
 
The government runs various social-security programmes. Some are employment-led, such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which promises 100 days of work per person annually, and the National Rural Livelihoods Mission (NRLM) which trains rural youth to be self-employed. Others, such as the food-security mission, promise rice and wheat at subsidised prices and offer support in kind and cash, such as old-age pensions.
 
There has been a 125 percent rise in funding, from Rs.47,014 crore in 2013-14 to Rs.1,06,115 crore in 2015-16. This vast anti-poverty apparatus-one of the world’s most extensive-barely addresses the needs of the asset-less class of Indians.
 
As IndiaSpend reported previously, schemes like the NRLM are struggling in areas with a significant rural population because self-help groups were not being formed or could not be formed.
 
Spending on trainers, healthcare similar to job funding
 
The J-PAL study found that the money spent over two years on each beneficiary-including spending on trainers and healthcare-was around Rs 20,000; roughly what the government would spend if the beneficiaries received 58 days of employment a year.
 
The study results prompted NGO partner Bandhan to scale-up the programme to 32,280 families in six states: West Bengal, Bihar, Odisha, Assam, Tripura and Madhya Pradesh. The programme is also being scaled up in 20 other countries.
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Modi is effective but graft, land bill, inflation remain issues: Survey

On corruption, which was a major electoral plank for the Bharatiya Janata Party in the run-up to the elections last year, more than 60 percent of the people polled felt the levels have either increased or seen no improvement, and just 12 percent agreed that graft has declined

 

Seventy-two percent of the people feel satisfied with the performance of Prime Minister Narendra Modi, according to a survey on one year of his government, but the majority also sees no let-up in graft, and more seem opposed to than supportive of his controversial land acquisition bill.
 
According to the survey conducted by Axis My India for IBN Network/#Modi365, the majority of the 20,000 people polled in 23 states, across 155 districts, with a 70:30 rural-urban spread, the main reason for satisfaction has been overall development, skillful governance and lower prices.
 
The reactions of people in the survey, shared with IANS, also dwelt upon the policies being pursued by the prime minister, and notably over 35 percent did not support the controversial land acquisition bill, an equal number were undecided and only 28 percent were supported it.
 
On corruption, which was a major electoral plank for the Bharatiya Janata Party in the run-up to the elections last year, more than 60 percent of the people polled felt the levels have either increased or seen no improvement, and just 12 percent agreed that graft has declined.
 
According to the survey, 56 percent of the people felt Narendra Modi was fast and effective as prime minister, an overwhelming 85 percent endorsed Swachch Bharat as his best initiative, and 76 percent listed his Jan Dhan Yojana as second best.
 
For his two other initiatives, Make In India received the support of 43 percent people, Digital India got the approval of 42 percent. 
 
Reactions also came on some of the controversies that hit the government and the ruling party during the past year. 
 
Some 34 percent of the people felt statements on "ghar vapsi", or re-conversion, dented the Modi government's image, 32 percent felt it had no impact, and nearly 35 percent were undecided on it.
 
Similarly, over 43 percent wanted Modi to rein in his cabinet colleagues who have made it a habit to make some controversial statements, and only 26 percent disagreed with the view.
 
There also appeared to be no clarity in the interference from the Rashtriya Swayamsevak Sangh, the ideological parent of the ruling party of which Modi has been a staunch member, in the functioning of the government.
 
Some 32 percent felt there was RSS intrusion, an equal number disagreed and 35 percent were undecided.
 
Then the question: How is Narendra Modi as prime minister? Nearly 57 percent opted for effective and fast, 15 percent for ineffective and slow, 2.6 percent for no will power, 3.7 percent for not so strict, 6.1 percent for clean image but not a good administrator, and 13.5 percent for less work, more talk.
 
Regarding the individual's economic improvement during the year, while 42 percent of respondents felt there was "better improvement", a little over 5.5 percent felt their condition has worsened.
 
The percentages were similar for perceptions about the overall economic condition of the nation. Over 43 percent felt there was "better improvement" and over 20 percent thought there was very good improvement.
 
Salient points of the Axis My India survey:
 
* Over 72 percent satisfied with Modi government in last one year, attributed to development, skillful governance, lower prices.
 
# 26 percent dissatisfied with government for want of development, with just over 14 percent attributing it to price rise.
 
* 56 percent feel Narendra Modi fast and effective as Prime Minister, while 13 percent say Modi is less work and more talk. 
 
# For 15 percent he is slow and ineffective, while over six percent say he has a clean image but is not a good administrator.
 
* 61 percent say their economic conditions have improved, while 63 percent say India's economic situation too has improved.
 
# 55 percent feel corruption has either come down or remained the same and 47 percent say inflation is down or has remained the same.
 
* Confusion over land bill -- Over 35 percent do not support the Land Bill, an equal number undecided, leaving only 28 percent supporting the bill.
 
# 43 percent support Make In India, and 42 percent say yes to Digital India. 
 
* 32.35 percent feel RSS interferes in government functioning, 35 percent are undecided, while 32.64 percent disagree there is interference. 
 
# 33.65 percent say Ghar Wapsi comments dent Modi government image, 34.59 percent are undecided on the issue, and 31.76 percent say such statements do not dent government image. 
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