Entrepreneurship in India: Historical Context and Future Directions

India's need for entrepreneurship is characterized by two main aspects: innovation and global marketing orientation. Historically, Indian entrepreneurship has evolved significantly from the Mughal era to the colonial period and post-independence.

Historical Overview

• Mughal Era:
  • Innovation was not prominent due to the pre-Industrial Revolution context.
  • Finance played a crucial role, controlled largely by entrepreneurs such as Jagat Seth in Bengal and Mulla Abdul Ghafur in Surat.
  • India was a significant exporter to West Asia, benefiting from empires like the Safavid and the Ottoman.
  • In 1700, India held 24% of the global GDP, which declined to 16% by 1820 due to industrial advancements in the West.
• Colonial Era:
  • Trade was conducted through bazaars dominated by Indian bankers, using the hundi system for transactions.
  • British agencies began to marginalize Indian traders in global trade.
  • Notable entrepreneurs included Jamsetjee Jeejeebhoy and Dwarkanath Tagore, who excelled in global trade involving opium and indigo.
  • Prominent industrialists emerged, such as Jamshed Tata and the Godrej group.
• Post-Independence Era:
  • Strong links between government and private enterprises were established, particularly during the licensing regime.
  • Innovation was driven mainly by new public enterprises, but many lacked effective management.
  • The shift towards private enterprise gained momentum after the 1991 delicensing and liberalization.

Contemporary Challenges and Opportunities

• India's significant growth in software, business services, and digital economy is attributed to the low-cost skilled labor force.
• Despite the presence of foreign-owned firms utilizing Indian labor, there is low indigenous engagement in sectors like chip manufacturing.
• The government has adopted subsidy-driven approaches to industrial development, exemplified by a $2 billion subsidy for a semiconductor plant in Gujarat.
• India lags behind countries like China, South Korea, and Taiwan in innovation.

Recommendations for Enhancing Indian Entrepreneurship

• Develop a government policy on entrepreneurship that favors market-friendly environments over specific sectors.
• Increase the influence of institutional investors in corporate management to curb the dominance of family-owned firms.
• Encourage startup proliferation linked to technological advancements and organizations like the Indian Space Research Organisation.
• Improve financial support for small enterprises, which currently rely heavily on informal sources.
• Formulate trade policies that incentivize rapid export expansion and promote local supplier development through foreign investment.

To compete globally, Indian enterprises must innovate and lead in international trade, supported by the government and stock market in their risk-taking ventures, similar to companies in East Asia like Samsung or Taiwan Semiconductor Manufacturing Company.