Chapter-1 Entrepreneur
Entrepreneur plays a vital role in the economic development of a nation. Economic
development refers to the income levels and its stability. This chiefly depends on its
entrepreneurs. An Entrepreneur is a kind of individual who aims at achieving his goals and who
possesses knowledge, skills, inventiveness, drive and spirit of innovation. An entrepreneur
always finds opportunities and transforms opportunities into achievement and gains economic
benefits. Entrepreneurship involves process of manufacture, innovation in production, usage of
new materials, and market etc. An entrepreneur does have that mental attitude to foresee risk and
uncertainty with a view to achieve a specific motive.
The word “Entrepreneur” is derived from the French verb ‘entrepredre’ which means ‘to
undertake’. It means Between Takers. Entrepreneur is another name of Risk Taker. An
entrepreneur is an individual who takes moderate risks and brings innovation. Entrepreneur is a
person who organizes/ manages the risks in his/her enterprise. “Entrepreneur is an individual
who takes risks and starts something new”
During the early 16th century the Frenchmen who organized and led military expeditions were
referred to as ‘Entrepreneurs’. During the early 18th century French economist Richard Cantillon
used the term entrepreneur for business. Since that time the word entrepreneur means one who
takes the risk of initiating a new organization or introducing a new thought, product or service to
society.
DEFINITION:
An entrepreneur is an individual who takes moderate risks and brings innovation. An
entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes
significant accountability for the inherent risks and the outcome. An entrepreneur is "one who
undertakes an enterprise, especially a contractor, acting as an intermediary between capital and
labour."
According to J.B. Say, “An Entrepreneur is the economic agent who unites all means of
production; land of one, the labour of another and the capital of yet another and thus produces a
product. By selling the product in the market he pays rent of land, wages to labour, interest on
capital and what remains is his profit”. Thus, an entrepreneur can be considered as a person who
possesses the initiative skill and drives to set up a business or enterprise on his own and
ultimately achieves his desired goals. He brings social change. He looks for opportunities, and
finds his own way mainly for economic gains. An entrepreneur is generally a highly calculative
individual who always undertakes risks in order to achieve his goals.
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According to Joseph Schumepeter, “An entrepreneur in an advanced economy is an individual
who introduces something new in the economy, a method of production not yet tested by
experience in the branch of manufacture concerned, a product with which consumers are not yet
familiar, a new source of raw material or of new market and the like”.
According to Cantillon “An entrepreneur is the agent who buys factors of production at certain
prices in order to combine them into a product with a view to selling it at uncertain prices in
future”.
To conclude, an entrepreneur is the person who undertakes risk, combines various factors of
production, exploits the supposed opportunities, and creates wealth and employment.
CONCEPT OF ENTREPRENEURSHIP:
The term ‘entrepreneurship’ is associated with the term ’Entrepreneur’. Though, they apparently
look same, conceptually they are different. Entrepreneurship is the process of finding
opportunities in the market place, planning for the resources required to convert these
opportunities into success and to achieve long term gains. It involves creating capital by
exploiting resources in new ways to initiate and operate an enterprise. Entrepreneurship can be
defined by describing what entrepreneurs do. For example: "Entrepreneurs use individual
inventiveness, and take on calculated risk to create new business ventures by raising capital to
apply inventive new ideas that resolve problems, meet challenges, or satisfy the needs of a
clearly distinct market." But the entrepreneurship is not limited to business and profit:
"Entrepreneurship involves bringing about change to achieve some benefit. This benefit may be
financial but it also involves the satisfaction of knowing you have changed something for the
better.”
"Entrepreneurship is essentially the act of creation requiring the ability to recognize an
opportunity, shape a goal, and take advantage of a situation. Entrepreneurs plan, persuade, raise
resources, and give birth to new ventures."
According to Cole “Entrepreneurship is the purposeful activity of an individual or a group of
associated individuals undertaken to initiate, maintain and aggrandize profit by production or
distribution of economic goods and services”.
According to Higgins “Entrepreneurship is meant the function of foreseeing investment and
production opportunities, organizing an enterprise to undertake a new production process, raising
capital, hiring labour, arranging the supply of raw materials, finding site, introducing a new
technique, discovering new resources or raw materials and selecting top managers for day to day
operations of the enterprise”.
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The above definitions highlight risk factors, innovative ideas and resource organizing aspects
and an individual or group of people who achieve goal through production or services. To
conclude, entrepreneurship is a set of activities performed by an entrepreneur.
FUNCTIONS OF ENTREPRENEURS:
An entrepreneur always seeks opportunity. He also manages and coordinates production and
services. He has to start with a small scale enterprise. He not only finds the business
opportunities but also utilizes the other resources like 5 Ms-man, money, machine, materials and
methods. However, the main functions of the entrepreneurs are as under:
1. Idea generation: This is the most essential function of the entrepreneur. Idea generation is
possible through the vision, insight, observation, experience, education, training and exposure of
the entrepreneur. It specifically implies proper selection of product and identification of project.
Ideas can be generated through surrounding environment and market survey. It is the chief
function of the entrepreneurs to generate as many ideas as possible so as to select the best
business opportunities for a commercially-viable business venture.
2. Determination of objectives: Another function of the entrepreneur is to determine and lay
down the objectives of the business. Entrepreneur should be quite clear regarding the following
things:
(i) The nature of business
(ii) The type of business
This indicates whether the enterprise belongs to the category of a manufacturing concern or a
service-oriented unit or a trading business. Thus, the entrepreneurs can attempt to venture in
accordance with the objectives determined by him.
[Link] of funds: Fund raising is the most essential function of an entrepreneur. All the
actions of a business depend upon the financial support and its apposite management. It is the
sole accountability of the entrepreneur to raise funds from both, internal and external agencies. In
this regard, he should be aware of the different sources of funds and the official procedure to
raise funds. He should be well aware of different government sponsored schemes such as PMRY,
SGSY, REGP, etc.
4. Procurement of raw materials: Another important function of the entrepreneur is to procure
raw materials. Entrepreneur has to find out the cheap and regular sources of supply of raw
materials, which will enable to reduce the cost of production.
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5. Procurement of machinery: The next function of the entrepreneurs is to procure the
machineries and equipment for establishing the new venture. While procuring the machineries,
he should specify the following details:
(a) The details of technology
(b) Capacity of the Installed machines
(c) Details of the manufacturers and suppliers
(d) After-sales service
(e) Warranty period of the machineries and instruments
All these details are to be minutely observed by the entrepreneurs.
6. Market research: Another important function of the entrepreneur is market research and
analysis of product. Market research involves the systematic data collection regarding the
product which the entrepreneur wants to manufacture. It has to be done indefatigably in order to
know the details of the product, i.e. the demand for the product, the supply of the product, the
cost of the product, the customers, etc. while initiating an enterprise.
7. Determination of form of enterprise: Entrepreneur has to consider the nature of the product,
level of investment, nature of activities, types of product, quality of product, quality of human
resources, etc. to decide the form of enterprise. The principal forms of ownership organizations
are sole proprietorship, joint venture, Joint Stock Company and cooperative society.
Determination of ownership right is crucial on the part of the entrepreneur to obtain legal title to
resources.
8. Recruitment of manpower: Entrepreneur has to perform the following activities while
undertaking this function:
(a) Estimating manpower need of the organization
(b) Forming selection procedure
(c) Devising scheme of reimbursement
(d) Forming the rules of training and development
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9. Implementation of the project: Entrepreneur has to work on the implementation of the
project. The acknowledged project is to be implemented in a time-bound manner. All the
activities from the initial stage to the final stage are to be accomplished by him in accordance
with the implementation schedule to manage cost and time, as well as to manage competition.
Thus, implementation of the project is an important function of the entrepreneur.
To conclude with, all these functions of the entrepreneur can precisely be put into the following
categories:
(i) Innovation
(ii) Risk bearing
(iii) Organization
(iv) Management
CHARACTERISTICS OF ENTREPRENEUR:
An entrepreneur is important for economic progress. He is the individual who introduces
innovative things in the market. He is considered not only as a simple owner of capital but also
as the business leader. He is a person with innovative skills, drive and aptitude who always finds
business opportunities and promptly utilizes them for exploitation. M.M.P. Akhouri, ex-
Executive Director, National Institute for Entrepreneurship and Small Business Development
(NIESBUD), New Delhi, considers entrepreneur “as a character who combines innovativeness,
readiness to take risk, sensing opportunities, identifying and mobilizing potential resources,
concerns for excellence and who is persistent in achieving the goal.”
To be successful, an entrepreneur should have the following characteristic features.
1. Need to achieve: Entrepreneurs must have strong and keen desire to achieve higher goals.
Their inner instincts motivate them to achieve higher goals: majority of the people dream of
achieving something but do not work towards achieving their dreams whereas Entrepreneurs act
incessantly to accomplish the goal and turn their dreams into reality. For them, success is
achievement.
2. Independence: Majority of the entrepreneurs establish their own business because they abhor
working for others. They prefer to be the boss of their own self and want to be enjoy
responsibility of their own decisions.
3. Risk-bearing: Entrepreneurs are the individuals who take decisions under unfavourable
circumstances and thus they are willing to take risk, but they never prefer gambling with the
results. They opt for reasonable risk rather than playing wild gamble. In a way they undertake
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calculated risk which is supposedly enough to be exciting, but with fair chances of success and
fruitful result.
4. Locus of control: According to Rotter’s locus of control theory, an individual perceives the
outcome of an event as being either within or beyond his personal control. Entrepreneurs believe
in their own capability to manage the consequences of their endeavour by influencing their
socio-economic environment.
5. Determination: Entrepreneur always sticks to his job. They take personal interest in solving
the problems while setting up the project. They keep on working quite sincerely until their
projects get implemented.
6. Positive self-concept: Entrepreneurs are never negative in their action. They always try their
best to convert their dreams into reality and prove their caliber. They utilize their positive
knowledge to support their thinking. They never entertain negative attitude.
7. Ability to find and explore opportunities: Entrepreneurs seek opportunities. They convert
the problems and challenges into viable opportunities. They plan out using their intelligence and
achieve their goals in realizing an opportunity.
8. Hope of success: Entrepreneurs set their goals with a hope of success. This is because they set
their goals that are practically possible.
9. Flexibility: Majority of the successful entrepreneurs measure the pros and cons of a decision
and change their decisions as per the situation. They on no account feel indisposed to revise their
decisions. They are always open to face any situation.
10. Analytical ability of mind: Entrepreneurs always keep aside their personal likes and
dislikes. They are always pragmatic in their approach. At times they opt for experts rather than
friends and relatives to assist them. They generally evade emotional and sensitive attitude
towards their business.
11. Sense of efficacy: Entrepreneurs are always goal oriented. They usually solve their problems
themselves. They set their goals for future and plan accordingly to accomplish them.
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12. Openness to feedback and learning from experience: Successful entrepreneurs always get
immediate feedback of their performance. They modify their plans on the basis of the feedback
received from the environment around them. They keep learning from their own experience and
never get disheartened having received unfavorable information. On the contrary, they get
stimulated by unfavorable information and involve themselves sincerely in their own tasks to
reach their preferred goals.
13. Confronting uncertainty: Successful entrepreneurs are always optimistic and take every
problem as the opportunity. They manipulate their surroundings in such a way that the works get
accomplished rationally. Thus, their extraordinary insight and skill makes each situation
favorable for them.
14. Interpersonal skills: Entrepreneurs always remain comfortable while dealing with people at
each level. They interact with raw material suppliers, customers, bankers, etc. for different
activities and that is their quality of interpersonal skill to deal with people.
15. Stress takers: Entrepreneurs do have that capacity to work continuously for longer time and
side by side solving the problems at the same time. They have to come across number of
challenges which many times give them stress. They can face these challenges if they have the
capability to work for long hours and keep themselves cool under monotony.
16. Time orientation: Entrepreneurs look forward to future trends on the basis of their past
experience and exposure. They stick to the time pragmatically while doing their jobs.
17. Innovators: Successful entrepreneurs are innovative with their ideas. They continuously put
their efforts in introducing innovative products, new technique of manufacture, opening new
markets and recognizing the enterprise.
18. Business communication skill: The entrepreneurs must possess good communication skill.
Both written and oral communication skills are necessary for the entrepreneurs for running
enterprise efficiently.
19. Telescopic faculty: Successful entrepreneurs always think in advance. They do possess
telescopic faculties that make them think for the future. Future point of reference makes them
quite attentive to the changing circumstances of the time and they tend to manufacture goods and
commodities as per the changing demands.
20. Leadership: Entrepreneurs should have the quality of leadership. The quality of leadership
will allow them to influence people by means of communication towards the accomplishment of
goals. As the leaders, they should provide the necessary motivation by guiding, inspiring,
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assisting and directing the members of the group for accomplishment of unity of action, efforts
and purpose. The quality of leadership also allows them to reduce the problems. Good
organizational work depends upon efficient leadership of the entrepreneur.
21. Business planning: Planning relates to deciding in advance what, when and how to do a
thing. Entrepreneurs should be well-equipped with dexterity and knowledge to set up their
business plan. A successful entrepreneur always follows the doctrine of management while
setting up his business. The planning can perform as a link between the current positions and
probable future form of the enterprise. It provides a sense of vision to the entrepreneurs to cope
with risky and uncertain situations.
22. Decision making: Decision-making skill is an elemental distinctive of an entrepreneur. This
helps them in choosing a particular course of action at every stage of creation of an enterprise out
of numerous alternative courses for the purpose of achieving particular goals. Hence, decision
making is essential at all times and mostly at circumstances of uncertainty and risk.
23. Ability to mobilize resources: Entrepreneurs must have the capability to marshal all the
inputs to acquire the end product. They have to mobilize Man, Money, Material, Machinery,
Market and Method efficiently to realize the ultimate product as entrepreneurship is a function of
gap filling and input completing.
24. Self-confidence: Entrepreneurs must have self-assurance to accomplish the task efficiently
and powerfully. They must take decisions on their own in unsure and perilous situation and
should stick to it assertively even if there occurs preliminary setbacks.
TYPES OF ENTREPRENEURS:
The following can be types of entrepreneurs.
SOCIAL ENTREPRENEUR
This is an individual who pursues innovative solutions to social problems. A social entrepreneur
adopts a style of which he/she can use to create and sustain social values. Most social
entrepreneurs engage in non-profit activities and are overwhelmed by social responsibilities and
conscience. They are primarily motivated to improve socio-economic well-being, educational,
health, fundamental, environmental, and health conditions of others.
SERIAL ENTREPRENEUR
This is an individual who CONTINUOUSLY comes up with new ideas, start the businesses and
often times sell to investors or shareholders. Serial entrepreneur’s start-up several businesses
with little intention to operate any of them for a long time. They are high-risk-takers with lots of
unique ideas and are not always interested in a career with a particular business/company.
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LIFESTYLE ENTREPRENEUR
This is an individual who creates profit from personal passion. He/she put their lifestyle ahead of
every opportunity. While most entrepreneurs are motivated to build a business to a certain stage
and sell to shareholders or investors, the lifestyle entrepreneur chooses to build a business they
are passionate about and grow the business into a long term, residual income that is sustainable.
Most lifestyle entrepreneurs are completely self-employed; this is to allow them time to set up
their projects. In a nutshell, a lifestyle entrepreneur is an addict of whatever they find themselves
doing, they do it so well, commit their time, resources and energy to see their project completed.
QUALITIES OF AN ENTREPRENEUR:
1. Be open-minded
2. Problem identifier and solver
3. Passionate
4. Confident and disciplined
5. Risk-taker
6. A constant flow of ideas
7. Creative
8. Competitive
9. Opportunist
10. Determination (Strong-willed)
Difference between Entrepreneur and Manager:
The key difference between an entrepreneur and a manager is their standing in the company. An
entrepreneur is a visionary that converts an idea into a business. He is the owner of the business,
so he bears all the financial and other risks. A manager, on the other hand, is an employee, he
works for a salary. So he does not have to bear any risks.
The focus of an entrepreneur lies in starting the business and later expanding the business. A
manager will focus on the daily smooth functioning of the business.
For an entrepreneur the key motivation is achievements. But for the managers, the motivation
comes from the power that comes with their position.
The reward for all the efforts of an entrepreneur is the profit he earns from the enterprise. The
manager is an employee, so his remuneration is the salary he draws from the company.
The entrepreneur can be informal and casual in his role. However, a manager’s approach to
every problem is very formal.
The entrepreneur by nature is a risk taker. His has to take calculated risks to drive the company
further. A manager, on the other hand, is risk-averse. His job is to maintain the status quo of the
company. So he cannot afford risks.
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Meaning of entrepreneurship:
Meaning of entrepreneurship: Entrepreneurship is the combination of a French and a German
word – Entrependre and Uternehmen, respectively. The word defines individuals who take the
risk of starting a new venture or enterprise. Basically, this is a highly zestful activity that enables
any entrepreneur to alter the process of production, bring in several innovative ideas, use new
materials, and so on. Entrepreneurship requires the ability to foresee risks and potentials and
running the enterprise effectively while coping with uncertainties and making profits
persistently.
Process of Entrepreneurship:
Identification of an opportunity: An entrepreneur always understands the potential
opportunities as well as visualizes a new market opportunity. Such entrepreneurs are highly
creative and always ready to embrace and apply new ideas and combat new challenges.
Entrepreneurs keep a check on the requirements, necessities, wants challenges, and problem
areas. They always get the first-mover’s advantage and higher credibility in the new market
scenario.
Establishment of a vision: Generation of ideas, creativity, coupled with past experiences, can
satisfy needs and tackle problems. There will be so many ideas. But the most feasible and
profitable one will be finalized. An entrepreneur always evaluates as well as assesses the risks
and rewards associated as well as the real and perceived value of the service. He also keeps a
check on the competitive business environment.
Persuading others: An entrepreneur builds a foundation team. This team includes people who
consistently work together for the accomplishment of a common goal. They wish to turn the
vision into reality. The team may include family members, partners, financiers, etc.
Gathering of important resources: Entrepreneurs come up with effective business plans for
attracting investors, partners, venture capitalists, promoters, financial institutions, and so on. A
successful entrepreneur will be able to research and identify resources that are required for
converting an idea into a feasible venture.
Adaptability: Monitoring and upgrading the organization according to the ever-changing market
scenario is quite important for an entrepreneur. There have to be enough funds ready for making
the required changes. The adaptability of human resources is also necessary for surviving the
dynamic business environment.
Creation of new venture: After an entrepreneur is done with the arrangement of all the required
resources, he needs to create and establish a new venture and run the business venture with
utmost proficiency. He needs to show a lot of enthusiasm and passion. Also, he needs to be
perseverant enough to keep faith in himself and his ideas.
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Barriers in entrepreneurship:
Following are the different types of barriers that come across the path of entrepreneurship:
Financial barriers: This is one of the most prominent barriers in the life of an entrepreneur.
Such barriers are quite common. Availability of funds is of great significance. If a delay happens
in gathering enough funds, then it may further delay the commencement of an enterprise. Also,
various business operations need a persistent flow of funds.
Personal barriers: Personal barriers are caused because of the emotional and psychological
blocks of an entrepreneur. Let us have a look at the various types of personal barriers:
Lack of motivation and encouragement: When an idea does not turn out to be fruitful, these
entrepreneurs give up quite easily. Even a minor failure is enough to demotivate them.
Inability to depend on and trust others: These entrepreneurs often find it difficult to trust
others while hiring their expert services. They waste much of their time deciding upon the best
service provider and then, too, cannot put their trust completely.
Lack of patience: If an entrepreneur loses interest because of any hurdle or obstacle, then he
does not have enough patience and perseverance to carry on with the entrepreneurship. Even the
initial losses are enough to discourage them and shut their enterprises.
Lack of confidence: These entrepreneurs never have enough confidence. They never trust in
themselves. They are somehow convinced that they will never be able to come up with a
successful business idea. They are always bothered about their inability to attract enough
funding. Hence, they almost give up on their dream of being self-employed and thus do not carry
on with entrepreneurship.
Lack of vision: There should never be any limitation to what you can achieve. Some
entrepreneurs, after making short progress, lose their vision and show no more interest in
expanding the business.
Sense of embarrassment/pride: Such entrepreneurs are way too proud or embarrassed to ask
for help from someone.
Environmental barriers:
Machinery: Machines are extremely significant to carry out multiple operations.
However, machinery does come costly. Also, technology keeps changing quite rapidly, and
hence, machines tend to get obsolete quite often. Thus an entrepreneur needs to replace them.
This process is quite difficult for the entire organization.
Raw material: The situation can get quite distressful if there is no raw material available
during the peak season of the work. This further increases the price of limited raw materials
available because of an increased level of competition.
Land and building: For an enterprise, it is necessary that proper acquisition of land is
made. Then, the construction of buildings will also have to be done. However, all these can be
quite expensive. When the land is rented, the fixed cost becomes a cause of worry for the
entrepreneur. He needs to keep paying the rents whether he is making any profit out of business
or not.
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Infrastructure support: There have to be proper roads, adequacy of power, drainage facilities,
water, and other such infrastructural supports. But because of red-tapism and increased
corruption, things tend to be quite complicated.
Labour: For successful entrepreneurship, there has to be the availability of skilled labor,
quality and quantity labor, and committed and loyal employees. Lack of any of these can lead to
severe disruptions in the working procedure of the enterprise.
Political barriers: When there are not enough government concessions, and incentives offered,
things start getting difficult for the entrepreneurs. Also, there has to be a proper socio-economic
setting to make things happen the way they need to. A politician should also focus on making a
society economically developed. Only then will things smoothen up for the entrepreneurs.
Societal barriers:
Caste and religious affiliations often act as hurdles in the way of a business. Financial stability
and family backgrounds also have to be kept in mind. These, too, can impact the operations and
development of an enterprise. Socio-cultural norms and values often act as barriers for modern-
day budding entrepreneurs. These age-old norms hamper the smooth development and progress
of business enterprises. The growth and transformation of entrepreneurship in India began in the
early times when the ‘barter system’ was a common means of exchange. However, before
proceeding, let us understand what entrepreneurship is and who entrepreneurs are.
Entrepreneurs are those individuals or groups who create new businesses and job opportunities.
Entrepreneurship is the ability of an entrepreneur to run and operate a business with goal-
oriented objectives. In this article, we will focus on the following:
Evolution of entrepreneurship and their classification into different areas.
Medieval Age
To discuss the growth or development of entrepreneurship in India, you must understand that
India has one of the oldest and most civilized business histories. During the Harappan
civilizations around 2700 BC, there was an internal and external trade culture. Also, due to this,
most foreign countries recognize Indian entrepreneurial skills.
Moreover, the increase in trade occurred during the era of Mughal rule. The popularity of Indian
products, arts, crafts, Vedic tools, foods, and much more attracted attention from different parts
of the world. The Arab mainland, western colonial counties and African countries were the major
parties involved in the trade.
At the same time, different countries like UK, France and Portugal expanded their colonies in
different parts of the world. However, a significant entrepreneurial change occurred when the
East India Company started its business from the Bay of Bengal and later occupied parts of
Bengal. It indirectly linked the entire Indian state into one business ecosystem.
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There were some major downsides to the colonial mindset of England. However, it also played
some good aspects in developing entrepreneurship in India.
Modern and pre-independence
This was the era of industrialization in India, where some of India’s best entrepreneurs rise. The
major events changed the face of entrepreneurship in India.
The first cotton textile mill was revolutionized in 1854 by an Indian entrepreneur, Kawasji
Dover. It was one of India’s boldest steps in the modern development of entrepreneurship
development.
Jamsetji Tata founded the company Tata Group in the year 1868. With the foundation of the Tata
Group, he has created a bar for entrepreneurship development in India.
1874 Cotton Mill by JRD Tata, TISCO by Dorabji Tata, 1932 Tata Airlines, Tata Steel Plant, and
more were high-rate businesses in India. At the same time, it has also played a major role in
various independence initiatives.
Post-independence
Entrepreneurship in India, along with the national economy, was ground-breaking after
independence. There was not much left in the Indian economy at that time. However, the
government took major steps to support India’s development which is as follows.
Prime Minister Nehru adopted the economic structure line of the Soviet Union. It gave a major
push to the New Industrial Policy of 1956. Similarly, this policy liberalized the bar and standards
set by the British government, which were the ultimate impediment to industrial development.
Economic reforms were carried out in the initial phase of governance. Also, prominent
economists adopted the Mahalanobis model, which primarily aims to support entrepreneurs.
As all these influential policies were in operation, few major industries were established as
opposed to the traditional textile and natural resource industries. Since independence, there was a
huge growth in entrepreneurship in India.
However, it may seem that most of the top entrepreneurs were already in business. But the reality
was different. Economic policies were not giving much support to the entrepreneurs, due to
which there was rough growth. However, the transformation of entrepreneurship began in 1990.
Transformation of Entrepreneurship in India
The major transformation of entrepreneurship in India began with the ‘Economic Policy Reform’
in 1991. The policy was further expanded in 2022. So, you can easily categorize the major
transformation of entrepreneurs in India by these two policies and events.
New Economic Policy
The New Economic Policy of 1991 was a huge turning point. This policy has included three
major aspects, which are as follows.
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Aspects Role
Liberalization Providing some provisions in different parts of the industry
It boosts the private sector, including banks and the stock market
Privatization Disinvestment of Public Firms to reduce the burden
Promote the national entrepreneurs for good business
Globalization Welcoming FDIs, and FPI Creating SEZ and Economic
Corridor for foreign companies
These were the most important of all the major aspects involved in the new economic policy.
However, all of them played an important role in developing entrepreneurship in India. Some of
the benefits that this policy replaced are as follows.
It gives a green signal to private banks and non-Indian banks to operate without any disruption. It
was the only reason for the huge circulation of money in the economy. And finally, it increased
loans and supported new entrepreneurs.
Due to the policy, foreign companies can find the best option to invest their money. This boosted
huge FDI and FPI in India and helped in understanding new and advanced technology.
Rise of India as a tech hub in the startup world where Indian tech people were the best choice for
US, UK, France and other country projects. At the same time, it also revolutionized the world of
technology.
The major objective was economic reform, which has also served in the transformation of
entrepreneurship in India. Before the policy, India’s entrepreneurship was based on the model of
traditional industries and agro-industries.
However, after the implementation of the policy, major changes were seen in the technology.
The rise of Infosys, TCS, Wipro, HCL, and more. Also, in automobiles, Maruti, Tata, Mahindra,
Bajaj, and more were emerging. But there is a limitation to this policy as it favours a lot of big
companies and does not give a chance to a small and new startup to take off.
Growth of Startups
In 2016, startups started to grow. There are some key aspects of this startup initiative whose
main objective is to provide and lend support for entrepreneurship development in India. By the
year 2015, startups were rampant in India. Moreover, India is also known as the ‘poster child of
an emerging market’. Some of the key aspects of the 2016 Startup Initiative are as follows.
The MSME ministry swung into action by supporting small and micro startups and firms. The
Make in India initiative allows entrepreneurship to live in India and work on its growth.
The NITI Aayog scheme was also launched. Its objective is to develop skills and provide training
to become a skilled resource.
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New innovators and potential entrepreneurs are helping their businesses in the Indian market
daily. If you consider the growth of entrepreneurship since 1990, you will see a sharp growth
every year.
The current Indian entrepreneurship world is becoming a highly favorable market for any
company to invest in. Also, most Indian companies have marked their potential in international
trade and shown the growth of entrepreneurship in India. However, among all other top start-ups
and companies, the IT sector of India is on the boom. It alone handles a large part of the
development of the entrepreneur representing India.
Indirect Effects of Entrepreneurship on the Economy
The indirect effects of entrepreneurship are not so visible, yet they are equally important for
economic development. The following are indirect effects:
Money Flow in the Market
The flow of money in an economy is as important. The more it flows, the healthier the economy.
Enterprises help in the flow of money in the market by creating employment and increasing
production and consumption.
Infrastructural Development
Start-ups thrive in the ecosystem. When an ecosystem is formed in a particular city, there is an
increase in the infrastructure of the city or particular area. For example, startups growing in
Bangalore, Hyderabad and Delhi. These cities were developed strategically to create a better
environment to support start-ups to meet the need for entrepreneurship.
Indirect Employment
Direct employment is the employment created by entrepreneurship within the business. But it is
not the only employment. Entrepreneurship also creates a lot of indirect jobs. For example, in an
area like Powai in Mumbai, infrastructural development creates a need for hotels, restaurants,
transportation, etc.
Increase in Related Services
When entrepreneurs grow and expand their operations, it requires many services. These services
may be outside their core expertise. For example, an ed-tech start-up would require several
services like human resources, marketing, consulting, legal services, etc. Therefore, when the
number of entrepreneurs increases, so does the demand for related services.
Importance of Entrepreneurship to the Economy of India
Entrepreneurship is important because it improves the standard of living and generate capital. Let
us look at some of the reasons for the importance of entrepreneurship.
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Economic Development by Entrepreneurs
It shows the importance of entrepreneurship in the best possible way. New products and services
produced by entrepreneurs can fuel the economic development of the companies concerned. This
is also true for areas that need to support new business.
For example, the boom of IT industries during the 1990s. The industry grew rapidly and it helped
many other businesses. Businesses have grown in related sectors, such as call centre operations,
network repair firms and hardware suppliers.
Contribution of Entrepreneurs to National Profit
Entrepreneurial projects help create fresh wealth. Established companies may remain confined to
existing markets and reach a threshold in terms of profits. Better goods, services or technology
from businesses enable the development of new markets and the creation of new wealth.
Entrepreneurial projects help create new capital. Better goods, services or technology from
businesses enable the development of new markets and the creation of new wealth. Also, higher
income in the form of increased jobs and higher tax revenue and expenditure leads to better
national income.
So, this importance of entrepreneurship helps in making the national income of a country. The
government will use these proceeds to invest in the country.
Social Change by Entrepreneurs
This importance of entrepreneurship breaks with tradition and reduces reliance on outdated
systems by providing unique products and services. This will improve the quality of life. Such as
the smartphone industry continues to grow, tech entrepreneurship will have a huge, long-term
impact on the planet.
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Need of Entrepreneurship for Economic Growth
Entrepreneurship is an instrument of social change and economic development. Entrepreneurs
firmly believe that it is entrepreneurship that will beat and transform the market with new-age
[Link] following factors define why entrepreneurship is needed in economic
development.
1. Innovation
Innovation is the primary element of entrepreneurship. New-age entrepreneurs are passionate
about innovations in technology and business models. Some of the primary examples of this are
Airbnb, Innova8, Ola, Zinerr etc. These companies not only bring innovation in technology but
also created unique business models that never existed before. It helps in making your life much
easier.
Policymakers of an economy consider innovation while creating a road map for the country’s
economic development. Innovation creates market ease and new opportunities and encourages
consumption. Therefore, entrepreneurship in India is important as it inspires innovation.
2. Employment
Employment is an important factor in the development of any economy. A low employment rate
indicates the poor health of an economy. An economy needs to generate more jobs and wage
opportunities to accelerate growth. It plays an important role in job creation.
The bigger the enterprise, the more job and salary opportunities are created. Therefore, the need
for entrepreneurship in India becomes important for economic development.
3. Living standard
The standard of living is, in a way, directly proportional to employment. Because employment
pays people, they spend their money on the purchase of goods and services. Therefore, the
consumption rate increases in an economy, and so does the production rate. This eventually
raises the basic wage, and people become able to consume higher quality goods and services.
If entrepreneurship in an economy is sector agnostic, it will go a long way in raising the standard
of living of the people. Therefore, the need for entrepreneurship in India becomes important for
overall economic development.
4. Social change
Social entrepreneurship is a modern term that encourages entrepreneurs to bring about change in
society. For example, crowdfunding companies are usually involved in social work such as
raising funds for NGOs. Their businesses bring positive changes to society. They not only help
the needy but also spread social awareness.
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A prosperous society facilitates the path of community development. Therefore, the need for
entrepreneurship in India is important as it brings together social reform and economic
development.
5. Research and Development
Research and development are the progress of innovation. When an entrepreneur comes up with
innovative ideas and builds a business from them, they need to continuously develop their
innovation to keep up with the market and improve the user experience. As the enterprise grows,
they spend more resources on research and development, which leads to technological progress.
Technological advancement not only supports a particular company but the entire nation. It
contributes to the growth of science and technology. The economy further utilizes these
developments to implement in various sectors to make progress. Therefore, the need for
entrepreneurship in India is necessary for the progress of science and technology.
[Link] Trivedi- SARVAJANIK UNIVERSITY