The Hindu Business Line : Unleashing the spirit of enterprise

To accelerate growth, we need to encourage business enterprise. We have to find a way to harness the entrepreneurial capability that resides within us, not quite dormant but certainly undervalued. It is time to spread prosperity by empowering people and promoting more local governance, says R. GOPALAKRISHNAN.

Enterprise is a creative and innovative response to the environment.

A fundamental characteristic of entrepreneurship is its capacity to generate employment, offer the promise of more income, and increase wealth. By doing so, it plays a pivotal part in providing individuals a platform from where they can aspire to a life in which their potential is realised.

Over time, much of the developed world has risen to the challenge of crafting just such a platform, and the business corporation as we know it today is a critical component of this idea of advancement.

For those of us in the developing world — in particular governments, businesses, and the people who drive them — the goal is clear: address inequities not in some sapless, trickle-down manner, but rather by creating economic spaces and providing resources to kindle the spirit of entrepreneurship that lifts people collectively.

Corporations and business houses have a different role to play in India, one with more obligations and nuances attached, than in nations where economic well-being has already been achieved.

The business community carries the responsibility to be socially responsive, to engender jobs and livelihoods, and to be more than profit-spewing monoliths answerable only to shareholders. The struggles India faces are many, but the country has significant advantages, too. It is among the world’s emerging economies, which together represent 80 per cent of the global population.

India is experiencing growth on a scale not seen previously. To accelerate this growth, we need to encourage business enterprise, and for that to happen we need to find a way to harness the entrepreneurial capability that resides within us, not quite dormant but certainly undervalued. An enterprising community is defined by an outward-looking attitude, by a willingness to explore new ideas as well as to accept exogenous influences. These qualities have been evident in Indian history throughout the centuries.

Global influences

India is fortunate in that it was never cut off from global influences during its long history, unlike a few of its Asian neighbours. For several centuries between 1500 and 1800 AD, Japan, Korea, and China experienced complete isolation from the rest of the world. As late as the 1920s, India was ranked fourth in world trade, with a market share of 2.5 per cent (it is less than 1 per cent now).

What followed was a downward spiral, the blame for which cannot be pinned entirely on the degradations of colonialism. During the first few decades of an independent India, central planning and socialist policies frustrated the natural entrepreneur. But that centuries-old DNA of entrepreneurship and restlessness would not be suppressed.

The liberalisation of the economy, a process that began in the 1980s under Indira Gandhi, triggered the nation’s release from a state of passivity. Indian businessmen are once again in a mood to do business with the world, and the world, in turn, is just as keen to do business with India.

Entrepreneurial behaviour is contagious; it produces a herd mentality, a bit like gold prospecting. It has been observed that knowledge industries emerge through “idea entrepreneurs,” such as consultants, journalists, and scholars.

These entrepreneurs may not establish new organisations themselves, but they do create new ideas, new industry segments, or entirely new markets. Thus, some 25 years ago, Texas Instruments first set up a global R&D centre in India, and several others followed that lead. Today there are more than 100 global R&D centres in Bangalore alone.

Local governance

India’s GDP growth during the last 15 years has, it is estimated, lifted about 250 million people from abject poverty. Despite this, its per capita GDP sits on the same level as that of the Ivory Coast and Lesotho.

The renaissance of the economy has been driven by the deregulation of the organised sector, which operates in the larger urban centres. But the 800 million people of “Little India” — the 600,000 small towns and villages with a population of less than 50,000 — remain in the clutches of a centralised and bureaucratic system.

In the 60 years since Independence, the Indian nation has experimented with many approaches to spreading prosperity, but we need better results. It is time to liberate India by empowering people and promoting more local governance.

That is the best way to spread prosperity to larger sections of our population because it will unleash the natural enterprise of our people.

We tend to see enterprise predominantly through an economic lens, but it also has a social and behavioural dimension: an action may be considered enterprising in one type of society but not in another.

For instance, the opening of a teashop by a person from a tribal community in India may be considered enterprising in his immediate social circle, but the same rules may not apply to a trading community.

Enterprise dynamics

Enterprise is a creative and innovative response to the environment. David McClelland established the now widely accepted view that enterprise is promoted by a high-achievement orientation that can be promoted by enriching people’s thinking and fantasy world with achievement language. Four factors influence entrepreneurship: the experiences of an individual; the traditions of the family and the society in which he lives; the support systems of finance, vocational training, and extension services; and a supporting and mentoring governmental policy framework.

In the 1960s, there was considerable interest in achieving rapid economic development through small enterprise all over the world. In India, the Small Industry Extension Training Institute was established, and it has done plenty of good work over the decades. But now there are multiple government agencies in India trying to do the same thing.

These agencies have become bureaucratised and lethargic when what is needed is purposeful effort to promote enterprise in small towns and villages.

This is a development that undermines the valuable gene of Indian enterprise, which has prospered through invasions, battles, and colonialism. This gene has required periodic refreshment but has never had to be resurrected. It is an asset that needs sustenance, not bureaucratic negation.

C. Rajagopalachari, one of independent India’s founding fathers and an erudite statesman, wrote: “There have been a great many periods (in India) during which the people had neither central nor regional governments exercising effective authority.

All these periods of what may be called a no-government condition could not possibly have been tided over but for the self-restraints imposed by our culture.”

A centralised bureaucratic set-up was always a rarity in India and power was not embodied in the concept of the state. Leaders ruled by capturing the symbolic seat of power and they extracted taxes rather than fundamentally changing the societies in their kingdom.

Indian society always carried on, somewhat unmindful of who was ruling and collecting taxes. Around the time of Mughal emperor Aurangzeb, India was not an integrated market for goods and services but a conglomerate of regional markets.

This was mainly due to three reasons: an underdeveloped road and river system, the danger of being looted while moving goods across the country, and the levy of Customs taxes at multiple points during transit.

(To be concluded)

(The author is Executive Director, Tata Sons Ltd. blfeedback@thehindu.co.in)

(This is the first of a two-part series of edited excerpts from an article originally published in the Fall 2008 issue of Innovations, a quarterly journal published by MIT Press, US.)

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