Recognise the small entrepreneur

IT is widely believed, and not without substance, that the recent large scale replacement of currency has caused avoidable distress to the small business man, micro and small entrepreneur and trader. The social and the mainstream media have been providing ample empirical evidence of the impact of the breakdown of cash transactions. It is also common knowledge that these small people contribute enormously to the production of consumer goods and providing a variety of services. Anecdotal evidence suggests that micro entrepreneurs have the resilience of rising from failures; failures do not deter them from starting a new business. They can sustain themselves on minimal infrastructure. In most cases, however, even that minimal infrastructure is not available to them.

In fact, the micro and small enterprises do much more than is commonly understood. Evidence from a number of developing countries suggests that sizeable development of small and micro enterprises in the rural areas is strongly correlated with reduction in poverty. It is also to be expected that self employment through small and micro enterprises not only adds to the income of entrepreneurs, but also generates one or two more jobs. It has also been observed that rural-urban migration is checked with the growth of micro enterprises in rural areas. Therefore, in order to have equitable growth with generation of jobs, a major thrust is called for in setting up and nurturing micro enterprises in rural areas.

According to the National Sample Survey of 2011, there are about 5.8 crore non-corporate business units, excluding the construction sector. Eighty-five per cent of these non-corporate enterprises are self-owned enterprises. They employ 10.8 crore persons, half of whom are in rural areas. There, non-farm enterprises do not need much capital. It is estimated that the value of fixed assets per unit is about Rs. 2 lakh. About one-fourth of the non-farm units are engaged in manufacturing and the remaining are accounted for by retail trade and services. Thus, the Indian non-corporate sector provides employment to the bulk of population. Sadly, however, no government till now has really reached out to them because there seems to be a policy preference for the corporate sector. The small entrepreneur is treated by the State and financial institutions with indifference, if not scorn.

Another factor that should be tested for policy formulation is whether the rural non-farming sector depends on agriculture for its survival and growth. The micro economic experience shows that the non-farm sector has grown even during the periods of stagnation in agriculture. Therefore, it seems that, while the non-farm sector has vital linkages with agriculture, its fortunes are not determined by agriculture alone. Entrepreneurship plays an important role.

THE true impact of these tiny entrepreneurs must be judged from the percentage of population touched by them, rather than the size of their turnover. An interesting study made in 2011 looks at caste-based entrepreneurship. It finds that the micro sector is dominated by backward sections of the societies-OBCs, SCs and STs. The National Sample Survey shows that 5 per cent of the sector is owned by STs, 14 per cent by SCs and 48 per cent by OBCs. In rural areas, 72 per cent of the self-owned enterprises belong to their disadvantaged caste groups. Women entrepreneurs own about 14 per cent of these businesses. It can, therefore, be concluded that policy instruments aimed at developing the micro sector would also help the less privileged sector of society and help in achieving inclusive socio economic development.

Over the next two decades, the continuing demographic dividend in India could add about two percentage points per annum to Indias per capita GDP growth, provided their entrepreneurship receives due recognition and support. On the other hand, there are warnings that the new youth from the middle class, who are barely educated, with no productive skills to speak of, could become a huge threat for Indias future. Which way do we go will be decided by the policymakers in the months and years to come.

Endpoint: Why is it that we have not learnt to honour the spirit of entrepreneurship in our youth?

VOL. 10 | ISSUE 11| FEB 2017