India is ripe for entrepreneurs to take the reins. Given the growth that the economy has seen, what else does it need to take their businesses to a global scale?
Earlier this semester, I had the opportunity, along with other colleagues, to visit the Shri Ram College of Commerce, one of the premier colleges affiliated to the University of Delhi. We met with several hundred undergraduate students interested in finding out more about opportunities for postgraduate study at the University of Melbourne.
At one point in the meeting, one of my colleagues asked the students to indicate the areas they would like to study. Not unusually, interest in traditional academic areas like marketing, management, economics and accounting were pretty evenly spread across the students. However, when we asked about entrepreneurship, about two thirds of the room raised their hands.
Shri Ram College of Commerce, or SRCC as it is more commonly known, is widely regarded as the best institution in India for business education, and when so many of the “best and brightest” have such a strong passion for entrepreneurship, it’s good news for all of India as entrepreneurs will be vital to India’s future prosperity.
India seems well-positioned to provide ample opportunities for budding entrepreneurs. It is already one of the world fastest-growing economies, and research institutions like the Centre for International Development at Harvard University expect this to continue. As a point of reference, India’s economy is projected to continue to grow at around 7% a year, with China at a little over 4%, the US at 2.5% and Australia a little over 1%. A lot of that growth will be driven by the massive change in the number of people who are classified as middle-class, with the OECD anticipating that within 10 years, about 25% of all middle-class citizens globally will be Indian.
The need to go global
However, having the potential for growth and actually achieving it, are two different things, and it is highly likely that a new class of entrepreneurs will need to emerge in India. Colin McLeod
For example, about 50% of all employment in India is still in agriculture and a high-growth India will need to create new businesses and whole new industries to drive new models of employment and economic growth. In addition, very few Indian companies have emerged as major global companies, the way that Chinese companies like TenCent, Alibaba and China Mobile have. While there are large, well-known companies in India, they are very reliant on their massive domestic markets, a point supported by the fact that while India position as 17th in global export rankings, despite having the world’s seventh largest economy in GDP terms.
A recent study by the IBM global Institute, with support from Oxford Economics, identified that one of the major barriers to entrepreneurship in India is simply a lack of innovation. The report which included responses from start-ups, venture capitalists, government, educators and established businesses found that most start-ups in India tended to be “Me-too”, either copying existing local businesses or well-known companies from overseas. The argument for a lack of innovation is also supported by India’s low level of patenting activity, with 1423 international patents lodged in 2015/16 compared to 14,626 for South Korea, 29,846 for China and 44,235 for Japan.
A further disincentive to potential entrepreneurs, is that setting up a new business in India can be very difficult with long delays in navigating through a complex and slow regulatory system, while access to venture finance is seen to be another major problem.
Despite these challenges, the outlook for start-ups in India is starting to improve. Some of these improvements have come from the entrepreneurs themselves. For example, food markets have always been a central part of Indian life, but the end customer often doesn’t know much about the source or quality of the products they buy, and they tend to be many layers of middlemen between the customers and the producers, with the result that only a very small part of the price that the end consumer pays, actually flows through to the producer.
A start-up called freshtomarket has used technology to develop a service that links the producers directly to the end customers and includes home delivery. There is much greater certainty over quality and price, with a much larger share of the revenue stream going back to the original producer.
The willingness of Indian consumers to embrace a different business model can be seen in the fact that freshtomarket.com has become the fastest-growing e-commerce start-up in Indian history, reaching $5 million in revenue in only nine months. Colin McLeod
While this might seem like a small number in a country with a population of more than 1.3 billion people, the launch of Aadhaar, the largest digital identity programme in the world with over 1 billion Indian citizens now registered, has created a powerful platform to deliver direct benefits to the poor who are frequently located in remote agricultural communities, with minimum leakage from either government welfare programs or payment receipts.
Supporting future entrepreneurs
The Indian government is also taking direct action to support entrepreneurs. While I was in India, I caught up with alumna Shruti Chandra who is now an investment manager at Invest India, a government initiative, and Shruti introduced me to her colleague Navpreet Randhawa, the Manager of Startup India, which is also part of Invest India.
Startup India has a number of functions, but they are all aimed at building the Indian entrepreneurial ecosystem. It does this by providing financial incentives for new companies to register with Startup India, offering an extensive range of educational and mentoring opportunities, facilitating access to finance, including both direct investment and access to a network of venture capital companies as well as programs to bypass the traditional bureaucratic processes for starting companies.
Women and Entrepreneurship
It is also clear from recent announcements by Prime Minister Modi, that India recognises that access to talent is critical to the growth of entrepreneurship in India. According to a recent report published by the McKinsey Global Institute, no other country in the world can gain as much in economic growth from improving women’s equality in business and society as much as India.
In business, everyone looks for a competitive advantage, and it might just be that women will be India’s competitive advantage in the new world of entrepreneurship. It seems reasonable to assume Prime Minister Modi recognises this, as he recently announced that the theme of the Global Entrepreneurship Summit 2017 to be held in Hyderabad from November 28 will be “Women First, Prosperity for All.”
Admittedly it is only a small sample, but if the students at SRCC are any indicationr, there will be no shortage of very capable women putting their hand up to help drive the next generation of Indian entrepreneurs.