India has a large pool of mass entrepreneurs who run local businesses such as salons, guest houses and kirana stores. However, this form of entrepreneurship is significantly underleveraged. India's SME sector employs only 21 per cent people involved in non-farm activities. It fares poorly when compared to other economies such as China (82 per cent), Bangladesh (75 per cent), USA (53 per cent) and Nigeria (50 per cent). The problem, however, isn't the dearth of mass entrepreneurs but their inability to scale up, build assets and create jobs.
K.P. Krishnan, Secretary, Ministry of Skill Development and Entrepreneurship, Government of India says, "The question is not about creating mass entrepreneurs but a flourishing mass entrepreneurship system which is voluntary and has high productivity."
Krishnan adds that even today young India largely aspires for either government or private sector jobs and entrepreneurship is more of a necessity than a choice. One of the reasons is the public sector wage premium, an incentive that is missing for small scale enterprises.
An earlier report "Microenterprises in India" by Azim Premji University's Centre for Sustainable Employment and the Global Alliance for Mass Entrepreneurship (GAME) finds that a majority of microenterprises are quite small and employ less than three workers. Moreover, wage levels in this sector are still very low. In 2015, a majority of industries paid between Rs 6,000-8,000 per month, says the report.
Labour issues aside, the level of productivity is quite low across the production cycle. Not only are these enterprises informal but also on the wrong side of the legal system on issues such as land and electricity.
Krishnan says if you dig into these factors, the serious villain will be the state. He explains that public policy is the root cause of at least half of these problems.
But, he adds, "If we admit that a lot of problems are with the government, we clearly don't want more government to solve this. So, the government should figure out how to do less government."
K.P. Krishnan was speaking at the launch of the report "Unlocking Entrepreneurship Opportunities for Women" by The Global Alliance for Mass Entrepreneurship (GAME), a partner-led platform that supports mass entrepreneurship, and Facebook.