Infosys co-founder and former CEO NR Narayana Murthy has often narrated the tale of his celebrated entrepreneurial journey. One anecdote stands out: He had to wait for an entire year to get a simple telephone connection, and three years for a licence to import computers. Murthy, who founded one of India’s largest software services firms in 1981 with six colleagues and seed capital of $250 that he borrowed from his wife, has used this story with great effect to demonstrate just how adverse the environment was for a young professional trying to venture out on his own more than three decades ago.
Much has changed in India since then, especially after the economic liberalisation in 1991. Fixed-line phones, wireless smartphones, laptops and tablets offering voice and data connection are readily available and at competitive rates. Not only has the improvement in connectivity and communications aided traditional businesses such as manufacturing, it has also spurred an entire generation of new-age enterprises: Ecommerce firms that leverage technology to reach customers in areas that weren’t physically accessible before.
The environment for entrepreneurial freedom in India—where an individual or a group of individuals can come together and start a business of their choice and grow it in scale—is far more conducive now than when Murthy was starting out.
Not only has technology made life easier, enterprises are attracting more of private equity (PE) and venture capital (VC) funding as they seek to grow. According to the India Private Equity Report 2015 by consulting firm Bain & Company, the total value of PE and VC deals in India grew by 28 percent year-on-year to reach $15.8 billion. This is nearly six times the value of PE/VC deals reported in 2005.
Evolving public sentiment backs this data. Harsh Goenka, the 57-year-old chairman of RPG Enterprises (a $3.6 billion-conglomerate with interests ranging from automotive tyres to information technology), says that in recent years, there has been an acceptance and celebration of entrepreneurial spirit in India. “We have made a lot of progress from the days of the licence raj. However, there are many obstacles that still remain, including bureaucracy, tax and corruption,” says Goenka, a second-generation industrialist.
Nafisa Radiatorwala, founder of Nature’s Glow, which makes ayurvedic skin and hair-care products, and exports them to the US, believes that the introduction of policies like the Prime Minister’s Employment Generation Programme that offers capital subsidies—from which she benefitted after the scheme was launched in 2008—have made a difference. “When we were starting out [in 2006], even if there were some policies on paper, their implementation wasn’t proper. Credit facilities were also very difficult to come by. Banks were averse to lending to startups,” Radiatorwala says. “Even if they did, it was against collateral, which the entrepreneur would find difficult to furnish.” Today, there are more schemes to foster new businesses, including those that encourage women entrepreneurs, especially in rural India.
Another hurdle is complex labour laws, which are particularly relevant to manufacturing companies. “Our labour laws, we have around 44, are complex and a great impediment to growth. To expect a small enterprise to take care of these issues is a tall order,” says Goenka. The labour laws fail to factor in the realities of operating a business. In a February 2015 guest post on the Financial Times blog, Bibhas Saha, professor at Durham University Business School, writes that India’s archaic labour laws make it difficult for enterprises to restructure themselves efficiently, especially in instances where they aren’t doing well.
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(This story appears in the 21 August, 2015 issue of Forbes India. To visit our Archives, click here.)
" BACK FACTORY " OF THE WORLD ? China is known as the " Factory " of the World India is known as the " Back Office " of the World Can India become the " Back Factory " of the World ? Wrong question ! Right question is : WHEN can we become the " Back Factory " of the World ? Answer is " hiding in plain sight " ! This week , an astronaut , sitting in a satellite 400 km above the earth and hurtling through space at 16,000 km per hour , operated a robot on the earth Earlier , scientists sitting in NASA space centre or in Shri Harikota space centre , have operated Mars Rovers / MOM ( Mars Orbital Mission ) remotely From a distance of millions of miles And soon , astronauts will be sending emails to earthlings from millions of miles away , using " Space Internet " on their Mobile phones Invariably , each such team of scientists , comprised Indians ! So , WHEN can our scientists - and software Start Ups - enable Indian workers , sitting in Hyderabad / Chennai etc , to operate / manipulate , machinery in factories of Europe / America / China ? I believe this can become a reality by 2020 , if Central Government and State Governments , just get out of the way of our scientists / Start Ups and leave them alone ! Then tell them : [ " You are our next generation of Freedom Fighters . Free our millions from poverty / starvation / jobless depression / ignominy / suicides Like war - ravaged people of North Africa , Indians cannot invade Europe / Australia / Canada , in search of jobs / better life We depend upon you to bring the jobs to India - jobs such as , * Operating Machinery in Factories abroad * Controlling Air Traffic at Airports around the World * Operating upon patients in Hospitals , all over * Teaching students in Schools , in remote Africa * Any job that currently requires immediate presence of a worker And , if you set up a " Back Factory " , you don't need to pay Corporate Income Tax for next 10 years ! Simply register on web site of Income Tax Department as a " Back Factory " owner and file annual " Zero Corporate Tax Return " ] When this happens , > Millions of skilled Indian workers will operate factories around the World , sitting in , internet connected " Back Factories " in small Indian towns > Foxconn will not need to replace its high-wage Chinese workers with one million robots ( as officially announced sometime back ) At half the wages of those Chinese workers , Indians will operate Foxconn factories , all over the World , remotely ! > " Contract Labour Act " will need to be replaced with " Back Factory " Act > " Minimum Wages Act " will need to be scrapped ! > India will not need to fight with WTO on " Manpower / Service Exports " > " Make in India " will morph into " Make from India " I hope NDA Ministers and members of NITI Aayog will ask , Narayan Murthy / Sam Pitroda / Azim Premji / Sundar Pichai / Satya Nadela / Ray Kurzweil etc : " How soon can this be done ? How can you help ? " ------------------------------------------------------------------------------on Sep 10, 2015