What is the Importance of Entrepreneurship in the Indian Economy?
Indian startups are attracting substantial investments from Western Businesses. Indian companies raised $10.9 billion in funding in 2020 and $35.3 billion in 2021. The interest of international investors is a good sign for the Indian startup ecosystem. The signs of which can be seen right now, wherein Indian startups have managed to generate employment opportunities for more than 100 million people. In the coming years, the importance of entrepreneurship will certainly have a bigger role to play in India’s economic development.
It is crucial to explore the question “What is the importance of entrepreneurship in the Indian economy” to understand more about how it will change the face of the country.
In this blog, you will learn:
- How does entrepreneurship contribute to the Indian economy?
- What are the benefits of entrepreneurship in India?
- What are the challenges faced by entrepreneurs in India?
- How can government policies support and promote entrepreneurship in India?
How Does Entrepreneurship Contribute to the Indian Economy?
The startup ecosystem worldwide seems to be in its golden era. Startups are transitioning into unicorns faster than they used to a decade ago, and most companies are household names because of their utility in our day-to-day lives. India itself is home to six unicorns that feature in the Top 100 Unicorns’ List. Furthermore, the 2022 Global Startup Ecosystem Report (GSER2022) projects that the global startup ecosystem has created $6.4 trillion in value.
India has emerged as the third largest startup ecosystem in the world, which includes 107 unicorns. As more startups turn into unicorn companies, the impact of entrepreneurship on India’s economic development grows significantly. Here are some ways in which entrepreneurship contributes to the Indian economy.
1. Job Creation
The Economic Survey 2021-22 revealed that Indian startups alone generated more than 2.69 lakh jobs in 2022, representing a 35.8% increase from 2021. This highlights the importance of entrepreneurship plays in creating job opportunities in the Indian market.
Besides job opportunities, entrepreneurial ventures also bring innovation and competition into the market. This inspires more entrepreneurs and attracts investments across various industries like manufacturing, construction, services, and technology.
2. Benefits of New Business Ventures
Typically, local communities benefit the most from entrepreneurial ventures. When entrepreneurs start their businesses, it opens up umpteen avenues for commercialization. Moreover, it leads to better infrastructure development.
3. Improved Standard of Living
Entrepreneurs play a significant role in enhancing the standard of living for individuals and communities by creating more job opportunities. Moreover, they improve individuals’ lives by producing affordable goods and services.
Furthermore, entrepreneurs bring new products and services to the market, eliminating the shortage of necessary goods.
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What are the Benefits of Entrepreneurship in India?
- Entrepreneurship increases job opportunities, which, in turn, reduces unemployment rates and improves the economic conditions of local communities
- Successful entrepreneurship contributes to the overall growth of the economy through increased production, consumption, and investment
- A thriving entrepreneurial ecosystem attracts foreign investment and international partnerships
What are the Challenges Faced by Entrepreneurs in India?
- Most entrepreneurs in India find it hard to begin their entrepreneurial journey because of limited knowledge and guidance on converting a raw idea into a successful business. Moreover, budding entrepreneurs are unaware of how to build product prototypes, create buyer personas, or even conduct market research.
- Despite technological advancements and startup-friendly government initiatives, there’s a fair share of aspiring Indian entrepreneurs who need handholding from experts, which is often missing.
- There are many Indian cities that are yet to be technologically adept. Thus, entrepreneurs face the enormous challenge of acquiring knowledge about technological advancements in their field due to the availability of modern tools.
- Business dreams are always driven by money; entrepreneurs often need to spend money during the startup phase until their business grows.
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What are the Government Policies That Support and Promote Entrepreneurship in India?
Starting and running a business can be challenging. Entrepreneurs generally struggle with funding. This is where governments come in. They play a pivotal role in creating an environment that supports and encourages entrepreneurial ventures. Here are some ways in which the Indian government supports entrepreneurs.
1. Atal Incubation Center (AIC)
Atal Incubation Center supports budding entrepreneurs by training them about modern business practices, complex rules and regulations, and capital equipment. The initiative aims to promote innovation and revolutionize the entrepreneurial ecosystem in the country.
2. Fund of Funds for Startups (FFS) Scheme
The Fund of Funds for Startups scheme is an initiative that aims to meet the funding needs of startups. Under the FFS scheme, the Government of India provides capital to SEBI-registered Alternative Investment Funds (AIF) and the Small Industries Development Bank of India (SIDBI), who, in turn, invest money in growing and potential startups.
3. MUDRA Loans
The Pradhan Mantri Mudra Yojana (PMMY) program intends to offer loans of up to 10 lakh rupees to small and micro businesses. This initiative seeks to support and promote the expansion of these businesses in India. These loans are given by commercial and small finance banks and Non-Banking Financial Companies (NBFCs). Entrepreneurs can approach any lending institution mentioned above or apply online through the UdyamiMitra portal.
Any Indian citizen with a business plan for a non-farm income-generating activity like manufacturing, trading, or the service sector is eligible for a MUDRA loan.
4. Startup India Seed Fund Scheme (SISFS)
The SISFS is a government initiative that aims to extend support to startups at various stages of their business cycles, like ideation, prototype development, product trials, market-entry, or manufacturing.
5. Small Industries Development Organization (SIDO)
Founded in 1954 under the central government, SIDO is pivotal in developing, coordinating, and monitoring policies for small-scale industries’ promotion and development. With its focus on promoting growth, SIDO contributes significantly to the economic and social progress of the nation.
6. Credit Guarantee Scheme for Startups (CGSS)
The Department for Promotion of Industry and Internal Trade (DPIIT) introduced the CGSS scheme to promote startup growth in India. In this scheme, the National Credit Guarantee Trustee Company Ltd. (NCGTC) provides credit guarantee coverage to banks that provide loans to startups.
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