As per the Global Entrepreneurship Monitor (GEM) 2021-2022 report, India is among the top five easiest places to start a new business. The report further highlights that India’s total entrepreneurial activity rate (percentage of adults aged 18-64 who are starting or running a new business) increased to 14.4% in 2021 from 5.3% in 2020. Moreover, India has become the 3rd largest start-up ecosystem in the world after the US and China.
However, the entrepreneurship ecosystem in India faces multiple challenges, which include:

• Lack of finances and infrastructure: Availability of stable cash flows is a challenge for enterprises, especially start-ups. For instance, in the initial phase of operations, start-ups do not easily get money from banks, given no credit history of the firm. Further, there is a lack of support mechanisms like incubators, science and technology parks, etc. that play a significant role in the life cycle of entrepreneurship.
• Disparity in spatial location: The rapid growth of a support system is concentrated in certain pockets of urban development centres, mainly in the technology hubs limited to metropolitan areas and some state capitals.
• Lack of an innovative business model: To be successful, a start-up must be innovative. However, Indian startups are considered to be less innovative than startups elsewhere due to lack of original disruptive ideas.
• Foreign influence: The big investors in India’s start-ups are from overseas, like Japan’s SoftBank, China’s Alibaba, and Sequoia from the US. One of the reasons for this is lack of a serious venture capital industry with an appetite for risk in India.
• Regulatory bottlenecks: A number of permissions from the government agencies is mandatorily required for starting and exiting a business, which makes the process of starting a business cumbersome

Despite the challenges, entrepreneurship is important for India since the entrepreneurs are the engines that spearhead the economic growth of India and shape its future in the following ways:

• Creation of new jobs and employment opportunities: A report by McKinsey Global Institute highlights that post COVID-19, annual GDP growth of 8.0 to 8.5 percent will be required with faster employment growth than in the past to create 12 million gainful non-farm jobs annually. Entrepreneurship will be significant in this regard.
  • For instance, Indian start-ups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT) created 1,92,427 jobs in 2021.
• Developing the manufacturing and services sectors: In a developing country like India, majority of the people depend on the primary sector for employment (around 50% in agriculture) and in such a scenario, some remain underemployed. Entrepreneurship helps them to move to the manufacturing and services sectors.
• More than 4,500 start-ups have been recognised by the DPITT in sectors relating to emerging technologies such as Internet of Things (IoT), robotics, artificial intelligence, analytics, etc.
• Economic development: Entrepreneurs frequently target new markets and tap audiences outside the focus of established firms creating new sources of revenue and profits.
  • India is witnessing development by virtue of entrepreneurship in Tier II and III cities due to financial constraints and competition in the metro cities. Further, some state governments like Kerala, Maharashtra, Tamil Nadu are offering schemes/incentives for setting up of small and medium enterprises in Tier II and III cities.
• Promotes research and innovation: Entrepreneurship thrives in innovative ideas, which promote research, development of new technologies, etc. This helps productive utilization of the human resources of the country.
• For instance, Graviky Labs, an Indian start-up, uses carbon sequestration to store the carbon from the atmosphere and processes the emissions into usable carbon.
• Community development: Entrepreneurs foster a sense of community among people with common goals and interests, whether in a single neighbourhood or across continents. Their products and services contribute to the community’s social and economic well-being.

In this regard, various steps have been taken by the government including hand-held support through schemes such as Mudra loans, NABARD-SHG-Bank linkage etc., concessions to entrepreneurs through schemes like Start-Up India, Stand-Up India etc., promotion of innovation through schemes like Atal Innovation Mission, IPR policy guidelines, National Initiative for Developing and Harnessing Innovations (NIDHI), etc. It is critical to foster entrepreneurship in India and the government should ensure that the physical infrastructure in the country and regulatory measures are conducive for that.