Issues in the Entrepreneurial Framework
Finance: Access to credit is considered to be one of the key problems faced by entrepreneurs in India. This problem is particularly acute at the start-up stage, where bank finance is hard to obtain. Despite new sources of finance such as venture capital, angel funding and private equity becoming increasingly popular, institutional finance is still not able to meet the current entrepreneurial demands.
Regulation and governance: An entrepreneur has to deal with a host of regulatory and compliance issues. These include registering one’s business, obtaining government clearances and licenses, paying taxes and complying with labour regulations. Cumbersome paperwork, long delays and red tapism involved in such transactions create unnecessary burdens for entrepreneurs, constraining their productivity and their ability to do business. As seen in the Doing Business 2008 rankings, India performs poorly in these indicators. A study investigating the effect of regulation on entrepreneurship using the GEM dataset shows India to be having one of the worst regulatory indices. Moreover, lack of clarity on information relating to legal and procedural aspects of starting an enterprise, as well as those relating to clearances, licenses and government schemes further aggravates the problem.
India’s Ranking in Doing Business 2008
Starting a Business -111
Dealing with Licenses -134
Employing Workers -85
Registering Property -112
Paying Taxes -165
Trading Across Borders- 79
Enforcing Contracts -177
Closing a Business -137 (Source: Doing Business, World Bank, 2008)
Manpower: Availability of skilled manpower is another crucial issue for entrepreneurs. For example, in a survey of entrepreneurs conducted by KPMG and TiE in 2008, skilled manpower emerged as the second most important factor for fostering entrepreneurial growth. Further parameters reflecting labour market efficiency and flexibility are dismal. In the Global Competitiveness Index, India ranks 102nd in hiring and f ring practices and 85th in employing workers in the Doing Business 2008 report.
Infrastructure: India’s physical infrastructure – roads, rail, ports, power, and telecom – is also considered to be a bottleneck to the smooth operation of entrepreneurial activity. The high transport and supply chain costs that poor infrastructure entails can be affect competitiveness to a great extent, particularly for a small and medium enterprise. Enterprises surveyed in the Global Competitiveness Report 2007-08, rated inadequate infrastructure as ‘the most problematic factor’ for doing business in India.
Education: While the influence of education on entrepreneurship is considered debatable,
increasingly education is being seen as part of the larger ecosystem that impacts entreprene-urship and entrepreneurial motivations. Greater practical exposure, critical analysis, entrepreneurship curriculum, incubation and mentoring, industry-research linkages can help in fostering entrepreneurship
Finance: Access to credit is considered to be one of the key problems faced by entrepreneurs in India. This problem is particularly acute at the start-up stage, where bank finance is hard to obtain. Despite new sources of finance such as venture capital, angel funding and private equity becoming increasingly popular, institutional finance is still not able to meet the current entrepreneurial demands.
Regulation and governance: An entrepreneur has to deal with a host of regulatory and compliance issues. These include registering one’s business, obtaining government clearances and licenses, paying taxes and complying with labour regulations. Cumbersome paperwork, long delays and red tapism involved in such transactions create unnecessary burdens for entrepreneurs, constraining their productivity and their ability to do business. As seen in the Doing Business 2008 rankings, India performs poorly in these indicators. A study investigating the effect of regulation on entrepreneurship using the GEM dataset shows India to be having one of the worst regulatory indices. Moreover, lack of clarity on information relating to legal and procedural aspects of starting an enterprise, as well as those relating to clearances, licenses and government schemes further aggravates the problem.
India’s Ranking in Doing Business 2008
Starting a Business -111
Dealing with Licenses -134
Employing Workers -85
Registering Property -112
Paying Taxes -165
Trading Across Borders- 79
Enforcing Contracts -177
Closing a Business -137 (Source: Doing Business, World Bank, 2008)
Manpower: Availability of skilled manpower is another crucial issue for entrepreneurs. For example, in a survey of entrepreneurs conducted by KPMG and TiE in 2008, skilled manpower emerged as the second most important factor for fostering entrepreneurial growth. Further parameters reflecting labour market efficiency and flexibility are dismal. In the Global Competitiveness Index, India ranks 102nd in hiring and f ring practices and 85th in employing workers in the Doing Business 2008 report.
Infrastructure: India’s physical infrastructure – roads, rail, ports, power, and telecom – is also considered to be a bottleneck to the smooth operation of entrepreneurial activity. The high transport and supply chain costs that poor infrastructure entails can be affect competitiveness to a great extent, particularly for a small and medium enterprise. Enterprises surveyed in the Global Competitiveness Report 2007-08, rated inadequate infrastructure as ‘the most problematic factor’ for doing business in India.
Education: While the influence of education on entrepreneurship is considered debatable,
increasingly education is being seen as part of the larger ecosystem that impacts entreprene-urship and entrepreneurial motivations. Greater practical exposure, critical analysis, entrepreneurship curriculum, incubation and mentoring, industry-research linkages can help in fostering entrepreneurship