Entrepreneurship: Open Secret

Critics don’t want any failures to happen in the success story of entrepreneurs and start-ups. They claim the stories of failures are well-hidden as if a state-run media doesn’t want the truth to come out. The risk-taking ability of an entrepreneur is squarely equated to a gambling nature and anyone succeeding is just a rare occurrence.

They are not ready to accept that overcoming failures is the only way to success, not giving up. Did we not learn even the most basic activities by overcoming failures or giving up after the first few attempts of walking, eating, or dressing? Rather, making systemic changes to reduce the chances of failure and positively dealing with such failures to fight back should be prioritised. As Prime Minister Narendra Modi outlined, “First, to liberate entrepreneurship, innovation from the web of government processes, bureaucratic silos. Second, creating an institutional mechanism to promote innovation & third, handholding of young innovators, youth enterprise.”. Indeed, Wealth Creators need to be respected by doomsday predictors.

A simple yet powerful framework of risk assessment is a 2×2 matrix of known, unknown and manageable, unmanageable. No one has any issues with ‘known, manageable’ and ‘unknown, unmanageable’ can’t be planned for. You bring in experts for ‘unknown, manageable’ and build a protection mechanism in the form of insurance, etc for ‘known, unmanageable’. This is precisely how an Entrepreneur operates when deciding on team expansion and bringing in investors, she is not a habitual gambler.

What helps with this process is continuous learning opportunities and India is proving to be on the right track. India has the third-largest ecosystem for Startups and is the fasted growing ecosystem for Unicorns. “India has more than 1,000 universities, over 11,000 stand-alone institutions, 42,000+ colleges & lakhs of schools…India is constantly learning & innovating…it’s ranking in Global Innovation Index has jumped from 81 in 2015 to 46 in 2021… In a bid to spread startup culture far and wide across the country, 16 January will now be celebrated as ‘National Startup Day’”, said Prime Minister Narendra Modi in interaction with more than 150 startups which had been divided into six working groups based on themes including Growing from Roots; Nudging the DNA; From Local to Global; Technology of Future; Building Champions in Manufacturing; and Sustainable Development.

With the advent of the digital age collecting and handling a large amount of data has become possible and cheap as well in recent years. This allows any motivated youngster to look around and spot opportunities to solve problems ailing the residents of his family, mohalla, village, town, district, state, country, or internationally. The rise of entrepreneurship has been a big equalizer too as 45% of startups in India are from smaller cities, and 45% of enterprises are run by women. India needs to trust and support its young, they are leading the country to a better future.

Enigma of Adarsh Gram

“You see,” Gandhi began, “the centre of power now is in New Delhi, or in Calcutta and Bombay, in the big cities. I would have it distributed among the seven hundred thousand villages of India. That will mean that there is no power… nobody could deprive them of their assets. There will then be voluntary cooperation between these seven hundred thousand units, voluntary cooperation – not cooperation induced by Nazi methods. Voluntary cooperation will produce real freedom and a new order vastly superior to the new order in Soviet Russia…. a system like the one I have outlined to you did exist though it undoubtedly had its weakness, else it would not have succumbed before the Moghuls and the British. I would like to think that parts of it have survived, that the roots have survived despite the ravages of British rule. Those roots and the stock are waiting to sprout…” Mahatma Gandhi‘s these words were noted by American journalist Louis Fischer in his book “A week with Gandhi” (4 to 10 June 1942).

There have been many attempts to realise this vision of Mahatma Gandhi that Indian villages are empowered and model of development. There certainly is a need to audit why Member of Parliament Model Village Yojana has not been successful since its inception in 2014. On the other hand, PMAGY was started in 2009 but the work could begin only in 2014 and now once more, Prime Minister Adarsh Gram Yojana has set a target to develop 8,000 model villages in next six months. Further, Ministry of Social Justice and Empowerment has determined to convert every scheduled caste majority village into a model village by 2025. As there are over 27,000 such villages, the work needs to be taken up on priority basis to achieve this target.

With monitorable indicators of villages provided with adequate sources of drinking water, villages with school creation, villages connected with all-weather road, and number of villages electrified, this programme is indeed the need of the hour to achieve Mahatma Gandhi‘s vision. Yet less than 20,000 villages have been covered so far under this Yojna. The slow progress highlights the need of much more aggressive redressal of implementation issues.

Why Members of Parliament, cutting across party lines, have not been able to develop model villages is a serious cause of concern. Perhaps a debate on this in the upcoming parliamentary session to find out the causes and resolve them would be a welcome step.

Banking on Unbanked

“Don’t have enough money to meet minimum balance requirements”, was the most cited main reason by unbanked Americans, still around 5.4% of households, FDIC reported last month. In contrast, the visionary step of Prime Minister Narendra Modi to have no such requirement for Jan Dhan Yojana has brought in a silent revolution. More than entire population of the USA has now obtained access to the banking system in India since the inception of PMJDY.

Atmanirbhar Bharat is turning into a mass movement similar to Namak Satyagrah. Access to financial services to the last person of the society – the poorest of poor, by PMJDY led interventions is perhaps the biggest enabler. This national mission for financial inclusion ensures access to financial services, namely, banking – savings and deposit accounts, insurance, remittance, credit, pension in an affordable manner. It is worthwhile to note the pace at which unbanked in India are catching up to the best in the world. The FDIC survey, started in 2009 in the aftermath of GFC, has just now begun to ask questions on bill payment services and use of a website for ETP to send or receive money domestically – which we know is almost ubiquitous now in India.

Indeed, sorting out reported accessing problems of Jan Dhan accounts and Aadhaar enabled payment systems need to be done on priority basis. So too is reaching out for still unbanked Indians, especially women, for enabling PMJDY further to reach 100% of India’s household.

The masterstroke of starting accounts with zero balance is evident in the amount actually deposited in these accounts. Total deposits crossed over ₹1.5 lakh crores. Let’s look at some comparisons to sense the victory of these zero opening-balance account deposits. How much cash does Reliance, India’s largest corporation, have in banks – less than ₹20,000 crores! What is the cash balance of well known national banks, say Bank of Baroda, ₹1.2–1.8 lakh crore.

Success of PMJDY can largely be attributed to uncomplicated access to these banking services to anyone who wants it, i.e. there is no categorisation of beneficiaries, which largely stems from the mantra of Sabka Saath, Sabka Vikas. The provisions made to ease account opening and operations in the form of no minimum balance requirement, embedded accident insurance cover, banking service on any phone (read non-smartphone), active monitoring and grievance–redressal mechanism have made this grand success feasible. India shows yet again a large-scale implementation capability not seen anywhere else in the world.

Indian Management under scanner

Indian ethos of “Vasudhaiva Kutumbakam” ( world is a family) and “Janani Janmabhumischa Svargadapi gariyasi” ( mother and motherland rank higher than heaven) complement rather than compete any leader’s world vision, whether it is business, politics, sociology, governance or any other domain. Vivekananda is said to have inspired JRD Tata to produce indigenously rather than going for easy imports. Further, he is said to have been the inspiration behind starting IIS (Indian Institute of Sciences) at Bangalore, the premiere research body in the country today. Modern Management Schools work with the concept of Globalisation as one fundamental tenet. Yet they are not upto the vision of Swamiji when he said, “Even in politics and sociology, problems that were only national twenty years ago can no more be solved on national grounds only. They are assuming huge proportions, gigantic shapes. They can only be solved when looked at, in the broader light of international rounds.”

In this background Yale University’s news publications that “Lack of managers keeps India’s businesses small” requires a careful look at their approach and understanding of the situation. It says, “The study, published in the American Economic Review, uses a novel model to compare the relationship between the efficiency of outside managers and firm growth in the United States and India. It shows that the lack of managerial delegation factors significantly into why businesses in India tend to stay small and has wider implications on the country’s economy, constraining innovation, economic growth, and per capita income.” It further says that “The researchers found that India’s economy suffers from “a lack of selection” — the process of creative destruction through which successful businesses expand while unproductive firms close or are swallowed up by competitors — allowing unproductive businesses to survive because successful businesses do not expand.“

Perhaps there is some merit in this argument if one looks at India which supports positive discrimination, but like reservation, these factors have complex historic as well as present day nuances. In his book “Cast as a social capital”, Finance Prof R. Vaidyanathan develops certain themes on ‘caste and entrepreneurship’ and argues that support comes from caste groups acting as social capital. Entrepreneurs hailing from particular castes like Gounders, Marwaris, Chettiars, etc. set up businesses with caste members as workers and funding source. Hence, capital constraints seem to be a more pressing issue than accepting unproductive managerial skills.

On the other hand, Indians are increasingly occupying top positions for most of the well run US Tech, Financial and other companies. It is said however that taking up American Citizenship is must for any foreigner before he or she is allowed to occupy top position in any of the US firms.

Perhaps this analysis would have focussed more on capital availability as a principal component to remain closer to reality in India. As the USA needs top brains from India and the rest of the world to keep the economy vibrant and growing, Indian businesses need capital to unshackle through various constraints and thrive globally. Saying this, with exponential increase in the number of Unicorns in India, clearly points out that an appropriate business environment is available now here under leadership of PM Modi and India is on its way to excellence.

 

Start of Indian Defence Start-up Ecosystem

Building on the mantra of Atmanirbhar Bharat, India has added 44 unicorns in 2021 alone bringing the total number to 81. This exponentially growing number of unicorns is not only backing innovative solutions but also large scale deployments. India has become a hotbed of start-ups including some of the difficult domains like defence. The upcoming budget is likely to provide a breakthrough to the defence related start-ups which is a core area for an Atmanirbhar Bharat. Proof in the pudding is the DRDO’s pursuit of self-reliance and successful indigenous development and production of strategic systems and platforms, which have given quantum jump to India’s military might. DRDO’s recent launches include long-range Supersonic Missile Assisted Torpedo (SMART), Stand-off Anti-tank (SANT) Missile, Extended Range Pinaka (Pinaka-ER) Multi Barrel Rocket Launcher System, Air version of BrahMos supersonic cruise missile, and Short Range Surface to Air Missile. Further, DRDO has recently transferred the technology of indigenous extreme cold weather clothing system (ECWS), three-layered and providing insulation upto -50 Celsius,to five India companies.

Around 200 Indian start-ups are seen to be committed to defence sector technology. One of the key domains for the full-fledged development of the defence start up ecosystem is a competitive defence equipment testing system. Presently the air-worthiness, sea-worthiness or the military-worthiness of any equipment is determined only by one institution CQIA. The dependence on just one institution that too at a much later stage of development of any military equipment is very expensive for research to reach production. Government has already paved the way for a competitive market by allowing DTIS, defence testing infrastructure scheme, whereby a requirement of a capital of 400 crores is projected to be invested in segregated labs. 75% of investment in any lab will come from Government of India and remaining 25% will come from private players. Even the involvement of private players has a requirement of minimum five members to participate for each lab constructing a section 8 company. These are expected to commence floater this year and completed in a timeframe of 24 months from then. After these labs are operational, any OEM or a start-up will have choices for testing, either to CQIA or any of DTIS established labs.

The last piece for a flourishing defence start-up ecosystem is the buildup of the order book. The upcoming budget is likely to provide for full 1000 crore in the form of orders for start-ups which is the requirement for sustenance of the ecosystem. Last year’s 1000 crore earmarking for Indian companies saw 498 crores to be given to iDEX start-ups which one hopes to be deployed by the end of the current financial year.