Democracy and entrepreneurship are both dimensions of personal freedom. Democracy requires freedom of expression, a free press, and a respect for human rights. A strong foundation for enterprise in a society allows all citizens to pursue their preferred livelihoods, benefit from choice, and provides an opportunity to generate wealth and improve standards of living.
In a functioning democracy, citizens have equal opportunities to pursue their ideas, passion and vision through the growth of enterprise and create livelihoods for themselves and others. This makes them active participants and beneficiaries in the economic growth and development of their country and the world.
Both democracy and enterprise have a rich history in India. In the 6th century BCE, the citizens of Vaishali, the capital of the republican Licchavi state, now in Bihar, were amongst the world’s first practitioners of democracy. Contemporary India’s tryst with democracy is unparalleled in the world in terms of its sheer human scale, political context and geographical location. Similarly, for centuries, the Indian subcontinent has been a hub of global trade and commerce. In more contemporary times, there is hardly any part of the world where Indian entrepreneurs have not made their mark. India’s entrepreneurial class is regarded as one of the country’s key strengths when compared with other emerging economies.
However, four decades of socialism in post-Independence India, dis-incentivised entrepreneurship. Although the state directly intervened only in some selected sectors of the economy, the license raj (“rule” of a complex system of permits and licences), made it extremely difficult for new entrepreneurs to scale up their businesses. Economic liberalisation in India since the early 1990s has removed some of those barriers and opened up opportunities. Globalisation, or global interconnectedness, propelled in part by major advances in technology, has further helped our entrepreneurs. The fast-growing enterprises and businesses of the two decades of liberalisation ensured that India’s emerging cadre of young graduates found productive employment within the country.
We have progressed significantly in opening up the economy; but economic liberalisation has so far benefited big businesses more than small entrepreneurs. The foot soldiers of capitalism still have to fight an everyday battle against the bureaucracy, antiquated laws, regulations and restrictions in raising capital to grow their business.
The biggest impact of socialism has been more insidious—it has affected the Indian psyche. The bedrock of enterprise is the ability to take risk. Failure is an inevitable stop in the journey of every successful entrepreneur. But Indians tend to deride risk and ridicule failure. The fear of failure is so ingrained in the Indian mind that even after experiencing some success, entrepreneurs are afraid of taking their business to the next level of scale and growth. Even after 20 years of liberalisation, few local businesses transform into regional powerhouses, and rarely does a regional brand grow to become a national player. During my travels across small-town India, I have met superb entrepreneurs, and encountered exciting ideas and promising brands. But only a handful of national brands or companies are based in these numerous towns, away from the few large metropolises of the country.
India will undergo the next and necessary phase of growth and development only when small enterprises start building national scale. Our economy is driven by domestic consumption and the burgeoning Indian middle class is increasingly demanding value-added products and services such as food and agri-products, textile, furniture and household goods. This demand is a unique opportunity for new enterprises to grow and prosper. A shift from commodity-led consumption to value-added consumption can create jobs for millions for Indians, generating income and creating wealth for those involved in this transformation. This will strengthen a virtuous cycle of consumption and development.
For such a cycle to be set in self-propelling motion, we must support the creation and consolidation of small enterprises, and change attitudes by encouraging risk-taking behaviour and being realistic about failure. Public policy should be shaped to enable small the red tape and bureaucracy that still surround the day-to-day operations of small businesses. At the same time, big businesses and India’s business leaders must play a larger role in mentoring domestic enterprise.
It is a well-established fact that small businesses create more jobs than big businesses. As the American economy emerges from the slowdown, small businesses are playing a big role in spurring economic activity. The U.S. has recently passed the Jumpstart Our Business Startups (JOBS) Act to further encourage the growth and funding of small businesses. India could take similar measures to unleash entrepreneurial energy. The resultant expansion in choices for consumers, and the growth in employment and incomes, will further India’s development. This will make our democracy more vibrant and sustainable.
Kishore Biyani is the founder and Group CEO of Future Group.
This article is part of Gateway House’s Democracy in Motion report.
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