Everybody and his uncle and aunt wants to talk about the great Indian entrepreneur..and how he is great. Well he is not great, he is generally s…ed. If he had a choice he would be in a happy government job, assured of an indexed pension, take leave to see the country…and generally be counting his PL, SL, ML, …and all other Leaves.
I love talking to the small businessman. Next to my office was a idli dosa vendor with whom I would have long chats. Unlike a friend of mine who can stand with a vada pav vendor, see the number of customers and arrive at India’s GDP..I was just trying to find out how profitable it is to be in business.
I found it is not. He pays no Income tax, no sales tax. So that is great right? No. Wrong.
Every evening the local police station would call for ‘nashta’ and not pay for it. In terms of value this was about 10% of his profits, at least. Yes he had an advantage – he helped a friend come out of the local police station in 10 minutes! All told after the bribes he was left with 70-80% of HIS LEGITIMATE INCOME. At least till his income reaches about Rs. 100,000 per month he is on par with a guy earning that kind of money. His costs are about 30% – whether he is selling sugarcane juice, vada pav, or idli dosa. HE is NOT your tax evader – net of ‘bribes’ he takes home 70%. He gets no pf, gratuity, paid leave, sick leave, etc. and has the huge insecurity that the gang wars will see an increase in costs or loss of the place where he has built goodwill.
I helped him a little in pricing – and he offered me fees for helping him (since I changed office I have no clue where he is, and his offer of great vada and coffee is lost!).
Most kids in MBA schools are there because India’s corporate sector does not have any patience to train plain graduates. Even in an MBA class if I do ask ‘how many of you want a government job, surprisingly 90% of the class puts its hand up’.
So government jobs, psu banks, private banks, fmcg, …others are the priorities. Entrepreneurship is just not an option.
I think when we started out on our careers the starting salary for a CA was Rs. 2500 per month. I could even then get Rs. 500 for filing a tax return. The opportunity cost of being in service was not as high as it is today. You knew you could do a Rs. 100,000 transaction on bse and get Rs. 1250 as ‘sub-brokerage’..we could sell research reports for Rs. 30,000 (annual starting salary for a CA).
However today a semi decent MBA starts off on a salary of 500k. A rank holding CA starts off on a sal of Rs. 750k…
chances are he will get a nice job, marry a nice girl…and be happy. Entrepreneurship be damned.
Here is an article with a slightly different view…
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