Lack of funding, governmental hurdles and a flimsy contract enforcement mechanism make India a difficult place for entrepreneurship, a recent Gallup survey has revealed, underlining the limited progress that Asia’s third-largest economy has made, despite registering robust growth and housing a massive young population.
The survey, which polled 5,000 individuals between January and March this year, shows that about 16 per cent of Indian adults currently own a business, of which only 22 per cent are formally registered, with about half of business owners working alone and 47 per cent employing five or fewer people.
However, a large section of those polled, 46 per cent, actually feel that the government makes it difficult to start a business, compared to 26 per cent who think otherwise. “In addition, the World Bank’s report ‘Doing Business 2012: Doing Business in a More Transparent World’ ranks India at 166 among 183 countries in terms of starting a business. This ranking is unchanged from 2011, indicating that little progress has been made toward reforming rules and procedures to benefit those planning to start a business,” the study said.
Moreover, seven in 10 Indian adults believe that corruption is widespread in government and more than six in 10 agree that corruption is widespread, the study added. But it’s not merely government. About 72 per cent of current business owners think that there is widespread corruption in the business community, while 80 per cent of those who plan to start a business in the next 12 months also feel that way.
But only three in 10, or about 29 per cent, of those who plan to start their business in the next 12 months say that they have access to the money they need. In 2011, this number stood at 37 per cent. “This level of financial support is also significantly lower than the average for all 20 Asian economic entities Gallup polled in 2011 (44 per cent),” the report added.
“The key problem for entrepreneurs seems to be less about the availability of funding and more about finding the right type of funding. The majority of existing venture capital funds for start-ups are focused on export-oriented IT or mobile solutions,” the study said.
At the same time, only 37 per cent of current business owners and 28 per cent of aspirational entrepreneurs know people who can give them advice about managing a business. Yet, only 22 per cent of those who plan to enter business in the next year have access to formal or informal training to start a business. That is lower that the Asian average of 44 per cent, the study said.
“The time needed to enforce contracts in India is almost triple the average among Organisation for Economic Co-operation and Development (OECD) countries, and the cost of doing so is almost double the OECD average,” the study said, “Indian entrepreneurs, often strapped for cash and time, are almost powerless when business partners cheat them.”
That may be why 83 per cent of entrepreneurs are the sole owner of their business, with only 16 per cent of those polled confident that they could find a trusted business partner other than family members.