Indian Entrepreneurship…
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…
http://www.pluggd.in/entrepreneurship-and-the-great-indian-tamasha-297/
pravin
so ,it is funny how the politicians show faux concern over the small retailers in india while considering the entry of foreign investment in retail. the stateand its workers and police themselves are the biggest enemies of the small entrepreneur .madhu kishwar had a good study of the cost of doing roadside business in delhi.it is beyond appalling.
Praveen
What u said in article is almost true even in lesser/smaller cities. In my hometown all my relatives(my father’s generation) are in business background. But almost all my cousins(of my generation) get into jobs and are now fetching salaries equivalent to double the profit of their father’s businesses.
Guys who got into business with some passion were looked as if they came into business with no other option & guys who don’t have courage to do business and sticked to their s***ing jobs & some how managed to get a decent packages(due to present boom) were looked as heroes 🙁
Diwakar
Entrepreneurship is slowly and certainly dying in India. In my opinion, a small farmer is actually an entrepreneur, though not necessarily by design. He is also moving away from farming and inspite of all hardships strives hard to send his children to an English medium school. Others who may want to become entrepreneurs are discouraged, dissuaded for the reasons that you have stated above and corruption is a major detriment. We are increasingly seeing a trend of businesses being set up in India by the politicans’ kith and kin, who do not necessarily have the required skills, but have the right connections. The Jindals, Marans, Bhartis etc. And the others….GVK, GMR etc. cultivate the connections over a period of time.
chaitanya
the problem definitely is education and social fabrication. We are born slaves of english. Most of the time common people spends his entire energy on leaning english. I have been to france/Germany no one speaks english. They have made right decisions to get all knowledge in their language. That itself reduces your efforts at very early stage. Anyway now we have passed that stage. Our brains are made to think of only one and one thing that is learn english and get good job. You cannot have decent life if you do not know english. Not because job demands it but society now demands it. I fail to understand simple things why we need to speak english at banks. I know couple of my friends who wanted to do business, food processing but could not speak fluent english. Banks simply ridiculed them and finally they had to opt for private loans which had huge outgoing. Then after banks their relatives taunted them. Finally they are successfully. Earning decent money. But the question is what about our attitude.
sanjay
Lots of points worth mentioning :
1. Roadside dosa vendor is still way better than his countryside counterpart. If Roadside dosa vendor decides to do a job, where will he be placed? So, he is in entrepreneurship not by choice
but i think he would still be better than similar people doing a job somewhere.
I understand that police is not doing a good job but notice that dosa vendor has got the place for his shop for free – without any rent. In US, it should be pretty difficult to achieve.
2. Entrepreneurship is not just about selling dosas on Road. Creating software products is also Entrepreneurship. Companies like IndiaGames, FundsIndia, RedBus are examples of such ideas. FundsIndia is really not a game-changer but still worth a mention.
3. I don’t know if people are aware of VC here. If you want to be successful you have to be in market at right time with a lot of marketing.
4. People will surely turn to entrepreneurship if jobs are aplenty. Steve Jobs told to Stanford University graduates — who were not foolish to stay hungry — to “Stay Hungry, Stay Foolish” . The point is surety of job will change the scene dynamically.
5. Today’s world is of specialization and scaling. Very true as world is becoming small because of internet.
Suresh
It seems the crux of the matter is regulation. The system creates so many hurdles that it requires a full fledged team to either beat it or subvert it.So logically the need for scale and connections.
The solution is therefore to have LESS government, since by definition a regulator is someone wise after the event (if at all).
Also it is the battle of visible returns (margins in trade) versus invisible returns (perks, indexed pension) and the guy whose income is exposed is fair game for the ‘system’ since the ‘system’ represents invisible returns (including bribes).
Also why people will pay fund manager fees but not financial planner fees!!
pravin
chaitanya,
the english “problem” is interesting.however,while i support the use of local languages for state/municipal/national govt use, for private institutins, one should leave it to market forces to determine the laguage of communication.currently english dominates,true.but there is a good reason english is preferred.english is here a signalling mechanism.it tells the banker that you probably went to school and perhaps college -if you speak very good english and therefore earn reasonably well for the bank to be interested in your business.they are not targetting the upwardly mobile local language speaker -in general. infact,if this was indeed a big mistake the banks were making,there would be entrepreneurs taking advantage of it and offering local language seva (in fact many bank IVRs do it these days)and thus tap an underserved market.