Role Of Entrepreneurship In Economic Development of India
Like entrepreneur, entrepreneurship is also defined differently by different authors. In simple words, entrepreneurship is a process which involves various activities to be undertaken to start an enterprise. It is, thus, a process of giving birth to a new enterprise. In nutshell, entrepreneurship is what entrepreneurs do. Entrepreneurship involves innovation and risk-bearing.
Entrepreneurship is regarded as closely associated with economic history of India. Accordingly, the evolution of entrepreneurship in India is traced way back to even as early as Rigveda, when metal handicraft existed in fire country. Over the years, entrepreneurship has passed through several upheavals.
The important ones include decline of Indian handicraft industry towards the end of the eighteenth century, advent of the East India Company, Swadeshi Campaign, the First World War, emergence of the Managing Agency Systems, the Second World War, partition of undivided India, inauguration of the planned development in the country, etc.
Entrepreneurship as a distinct factor of production contributes to the economic development of an economy. The wide range of significant contributions that entrepreneurship makes to the economic development include promotion of capital formation, creation of immediate large-scale employment, promotion of balanced regional development, effective mobilisation of capital and skill, induction of backward and forward linkages, etc. The overall role of entrepreneurship in economic development of an economy is put as “an economy is the effect for which entrepreneurship is the cause”.
The word development is used in so many ways that its precise connotation is often baffling. Nevertheless, economic development essentially means a process of upward change whereby the real per capita income of a country increases over a long period Of time.
Then, a simple but meaningful question arises: what causes economic development? This question has absorbed Are attention of scholars of socio-economic change for decades. In this section, we attempt to shed light on an important aspect of that larger question, the phenomenon of entrepreneurship.
The one major issue we address here is: what is the significance of entrepreneurship for economic development? Does it add an important independent influence to that of other factors widely agreed tp promote economic development?
Adam Smith17, the foremost classical economist, assigned no significance to entrepre neurial role in economic development in his monumental work ‘An Enquiry into the Nature and Causes of the Wealth of Nations’, published in 1776. Smith extolled the rate of capital formation as an important determinant of economic development.
The problem of economic development was ergo largely the ability of the people to save more and invest more in any country. According to him, ability to save is governed by improvement in productivity to the increase in the dexterity of every worker due to division of labour.
Smith regarded every person as the best judge of his own interest who should be left to pursue it to his own advantage. According to him, each individual is led by an ‘invisible hand’ in pursuing his/her interest. He always advocated the policy of laissez-faire in economic affairs.
In his theory of economic development, David Ricardo identified only three factors of production, namely, machinery, capital and labour, among whom the entire produce is distributed as rent, profit and wages respectively.
Ricardo appreciated the virtues of profit in capital accumulation. According to him, profit leads to saving of wealth which ultimately goes to capital formation.
Thus, in both the classical theories of economic development, there is no room for entrepreneurship. And, economic development seems to be automatic and self-regulated.
Thus, the attitude of classical economists was very cold towards the role of entrepreneur- ship in economic development. They took the attitude: “the firm is shadowy entity, and entrepreneur even shadower-or at least is shady when he is not shadowy”.
The economic history of the presently developed countries, for example, America, Russia and Japan tends to support the fact that the economy is an effect for w’hich entrepreneurship is the cause.
The crucial role played by the entrepreneurs in the development of the Western countries has made the people of under-developed countries too much conscious of the significance of entrepreneurship for economic development.
Now, people have begun to realize that for achieving the goal Of economic development, it is necessary to increase entrepreneurship both qualitatively and quantitatively in the country.
It is only active and enthusiastic entrepreneurs who fully explore the potentialities of the country’s available resources — labour, technology and capital. Schumpeter visualised the entrepreneurs as the key figure in economic development because of his role in introducing innovations. Parson and Smelser described entrepreneurship as one of the twro necessary conditions for economic development, the other being the increased output of capital.
Harbison includes entrepreneurs among the prime movers of innovations, and Sayigh simply describes entrepreneurship as a necessary dynamic force. It is also opined that development does not occur spontaneously as a natural consequence when economic conditions are in some sense ‘right’: a catalyst or agent is needed, and this requires an entrepreneurial ability.
It is this ability that he perceives opportunities which either others do not see or care about. Essentially, the entrepreneur searches for change, sees need and then brings together the manpower, material and capital required to respond the opportunity what he sees.
Akio Morita, the President of Sony who adopted the company’s products to create Walkman Personal-Stereo and India’s Gulshan Kumar of T-Series who skimmed the audio-cassette starved vast Indian
market are the clearest examples of such able entrepreneurs.
The role of entrepreneurship in economic development varies from economy to economy depending upon its material resources, industrial climate and the responsiveness of the political system to the entrepreneurial function.
The entrepreneurs contribute more in favourable opportunity conditions than in the economies with relatively less favourable opportunity conditions.
Viewed from opportunity point of view, the underdeveloped regions, due to the paucity of funds, lack of skilled labour and non-existence of a minimum social and economic overheads, are less conducive to the emergence particularly of innovative entrepreneurs.’ In such regions, entrepreneurship does not emerge out of industrial background with well developed institutions to support and encourage it.
Therefore, entrepreneurs in such regions may not be an “innovator” but an “imitator” who would copy the innovations introduced by the “innovative” entrepreneurs of the developed regions.
In these areas, according to McCelland’s concept of personality aspect of entrepreneurship, some people with high achievement motivation come forward to behave in an entrepreneurial way to change the stationary inertia, as they would not be satisfied with the present status that they have in the society.
Under the conditions of paucity of funds, and the problem of imperfect market in underdeveloped regions; the entrepreneurs are bound to launch their enterprises on a small-scale. As imitation requires lesser funds than innovation, it is realized that such regions should have mpre imitative entrepreneurs.
And, it is also felt that imitation of innovations introduced fri developed regions on a massive scale can bring about rapid economic development s under-developed regions also. But, it does not mean that such irritation requires in any way lesser ability on the part of entrepreneurs.
In this regard, Bema opines; “It involves often what has aptly been called ‘subjective innovation’, that is, the ability to do things which have not been done before by the particular industrialists, even though unknown to him, the problem may have been solved in the same way by the others “ These imitative entrepreneurs constitute the main spring of development of underdeveloped regions.
Further, India which itself is an under-developed country aims at decentralised industrial structure to militate the regional imbalances in levels of economic development, small-scale entrepreneurship in such industrial structure plays an important role to achieve balanced regional development.
It is unequivocally believed that small-scale industries provide immediate large-scale employment, ensure a more equitable distribution of national income and also facilitate an effective resource mobilization of capital and skill which might otherwise remain unutilized.
Lastly, the establishment of Entrepreneurship Development Institutes and alike by the Indian Government during the last decades is a good testimony tqjier strong realisation about the primum mobile role of entrepreneurship played in economic development.
The important role that entrepreneurship plays in the economic development of an economy can now be put in a more systematic and orderly manner as follows;
1. Entrepreneurship promotes capital formation by mobilising the idle saving of the public.
2. It provides immediate large-scale employment. Thus, it helps reduce the unemployment problem in the country, i.e., the root of all socio-economic problems.
3. It promotes balanced regional development.
4. It helps reduce the concentration of economic power.
5. It stimulates the equitable redistribution of wealth, income and even political power in the interest of the country.
6. It encourages effective resource mobilisation of capital and skill which might otherwise remain unutilized and idle.
7. It also induces backward and forward linkages which stimulate the process of economic development in the country.
8. Last but no means the least, it also promotes country’s export trade i.e., an important ingredient to economic development.
Thus, it is clear that entrepreneurship serves as a catalyst of economic development. On the whole, the role of entrepreneurship in economic development of a country can best be put as “an economy is the effect for which entrepreneurship- is the cause”.
