India: Entrepreneurship and job growth

Praloy Majumder & Ashish Kumar Singh

Around 12 million Indians joining the labour force every year. With millions of young people joining the labour market every month, the question everyone has is if there will be enough jobs for them. Few are asking who creates jobs. Entrepreneurship and job creation is directly proportional one does not need to worry about it. The question, however, is if India (and other Asian countries) are ready to change their way of seeing things

The next round of growth story would be coming from the Asian countries. This phase of economic growth can be termed as the fourth stage of economic growth of the world. The first stage of economic growth was driven by the discovery of steam engine followed by a second round of economic growth was driven by the USA. The third round of economic growth was driven by market economy post world war II. All the previous three phases of economic growth was driven by the developed nations. However, this fourth round of economic growth would be driven by Asian countries. This round of economic growth would be fundamentally different from previous rounds of economic growth.

During previous rounds of economic growth, population and natural resources were not constrains. Besides the capital formation of first round and second round of economic growth has put the developed nations at an advantageous position. Social security was not a problem as the population was not large. However, the situation has changed. Due to the presence of social security network in the form of unemployment allowances etc, the income disparity was not a severe problem. However, with an increasing amount of unemployment, the income disparity is becoming a problem even in the developed country.

However in the fourth round of economic growth income inequality would be a major problem due to the absence of a proper social network as well as a strong judicial system. Crony capitalism which is associated with developing economy has increased the economic disparity too great extent and this can lead to disruption of the social fabric of the countries which would drive the global growth. So it is imperative that this problem of economic disparity is addressed at the beginning well before it turns into a monster.

The fundamental ways to reduce the income inequality is to increase the income for a large number of people. This would be possible by creating a system where more and more number of people would get a meaningful job. This is particularly true for cases where a large number of population is entering in the job market. For e.g. in India, every month about a million people are entering in the job market for the last two years and this would continue for the next ten years. In this backdrop, the availability of job is crucial to reduce the income equality.

At the same time, the world has moved towards embracing automation in a big way. The advent of Artificial Intelligence ( AI), Robotics are threatening the creation of lower-level jobs. These lower level of jobs are crucial to generate sufficient employment for a large number of workforces who do not have specialized skillsets to capture the benefits of the advancement of AI and Robotics.

Creation of entrepreneurship is one of the possible solutions to this problems. If more and more entrepreneurs are created, then more and more job would be created. However, entrepreneurship creation is a serious business even on a smaller scale. However today the requirement is the creation of entrepreneurship in a massive scale.

To achieve this objective a methodical approach is required. This is not just a question of providing a wage employment, but about creating an entrepreneurial society and how such society would work towards the solution of employment-related problems. Several factors play important roles in developing entrepreneurship in a country. Identification of these factors is of crucial importance. Besides the relative degree of importance of specific factors would vary from country to country. In India, for example, caste-class-religion may or may not a crucial role, gender also an important factor in Indian as well as in other Asian societies. Government rules-regulations, availability of funds, training, nurturing/incubation etc are also some such factors.

The report titled “National Knowledge Commission Report to the Nation 2006-09” has two chapters worth mentioning related to our inquiry. Emphasizing the importance of Vocational Education and Training (VET), the National Knowledge Commission (NKC) consulted with different stakeholders and provided some short and long-term strategies as follows. The report suggesting the formation of National Institute for Vocational Education Planning and Development under MHRD to continue working on the theme of Vocational Education and Training.

The report also suggested finding linkages between mainstream education and VET- that to some extent seems to be fulfilled by National Skill Development scheme. The demand for both skilled and unskilled labour has increased in recent years, the report says that in order to have sufficient supply of labour the government should take innovative steps such as distance training, decentralized delivery, public-private partnership etc. A focused approach is required to enhance the training options for the unorganized and informal sector. The report provides various recommendations for strengthening the existing institutional infrastructure of Industrial Training Institutes (ITIs) and Industrial Training Centres (ITCs). The report recommends the formation of an independent regulatory agency should be established. It would provide a license to the accreditation agencies and prescribe standards for certification. While talking about the current certification system the report asks for proper certification, probably electronic identification as well.

The NKC report in its chapter on Entrepreneurship states that it is important to recognize the importance and significance of entrepreneurship in wealth creation and employment generation in India.  To accelerate the growth of Entrepreneurship in India, the report recommends creating a supportive business environment by simplifying processes, curbing corruption and improving delivery time. Establishing newer institutional mechanisms to rebuild the structure and ambiance required for the growth of entrepreneurship in India. Facilitating information flow is also considered an important part of this process. An increased awareness and emphasis should be given to providing early stage finance. For entrepreneurship seed capital plays a key role, the report recommends some solutions to it such as developing new institutions and instruments for start-up funding. The role of business incubation before market entry is considered a primary factor, which also affects the success and viability of an enterprise. The last but not the least recommendation suggests to recognize and reward successful entrepreneurs in India.

While at the societal level majority of India faces challenges on the everyday basis, one cannot deny that having a possibility of income generation (/or regular income) may not solve all the problems but can certainly reduce the pressure. Entrepreneurship today is neither limited to being a characteristic of a certain class or merely a buzzword in roundtables. There is much to do in this direction and there will not be homogenous growth as Ejaz Ghani puts it, “The two most consistent policy factors that predict overall entrepreneurship in a district are its local education levels and the quality of local physical infrastructure.

… The future of jobs remains positive, given that India is starting from a low base in entrepreneurship. India’s strength in entrepreneurship lies in its small enterprises. They are now well integrated with global supply chains. Last but not least, women-headed entrepreneurship will become the new driver of job growth in the future.

The policy message on entrepreneurship and job growth is simple. Local governments wanting to promote pro-entrepreneurial growth should focus less on firm-casing —attracting large mature firms from somewhere else—and focus more on encouraging entrepreneurship in their community. This link between entrepreneurship and job growth is not automatic. Places with a higher level of local education and better quality of local infrastructure will attract many more entrepreneurs and create many more jobs.”

It needs a meticulous approach with proper checks and balances in place.