Forbes India 15th Anniversary Special

Discovering India's Hidden Gems

India had the second largest number of shadow enterprises in the world, with 127 unregistered firms for every one registered

Published: Jul 11, 2014 06:10:51 AM IST
Updated: Jul 10, 2014 11:08:03 AM IST

India has never been a great place to do business in. In 2014, India slipped a further three places from 131 to 134 (in a field of 189) in terms of ease of doing business, according to a World Bank report. But 134 is just the overall rank; in terms of ease of starting a business, obtaining construction permits, paying taxes or enforcing contracts, we are closer to the bottom.

Discovering India's Hidden Gems
It is thus a wonder that we produce any entrepreneurship at all. This issue of Hidden Gems is about discovering some of the intrepid entrepreneurs who are just a hop, step and jump away from success. The 16 Hidden Gems Forbes India has tried to uncover are almost all unlisted, profitable (to varying degrees) and their growth has been substantially funded by private equity and venture capital. Some of them will tap the stock markets when the time is ripe. This is why we call them Hidden Gems—companies whose existence or profit potential is largely hidden from the outside world.

India is a gold mine for private equity investors and venture funds precisely because it has the potential to deliver bigger bang for the PE/VC buck. “Someone in Silicon Valley will raise $10 million to build a company, but the same thing can be done for $3 million in India,” Nexus Venture Partners co-founder Sandeep Singhal told Forbes India Editor Sourav Majumdar.

But, as any gold miner will tell you, for every gram of gold, you also get a tonne of muck. The sad fact is the bulk of India’s entrepreneurship operates in the grey zone of illegality. The reason has to do with the difficulty of doing business. At the bottom of the Indian pyramid of entrepreneurship, most entities operate in the shadow world as illegal entities that produce real goods and services but have no legal existence. A study by UK’s Imperial College Business School estimated that India had the second largest number of shadow enterprises in the world, with 127 unregistered firms for every one registered. (Indonesia topped the list.) If this figure does not shock the Indian government, one wonders what would. The existence of so many shadow enterprises means loss of tax revenues, workers with no legal protection, and huge flows of black economy. The message for our policymakers is simple: If they can only make life easier for entrepreneurs, more of them would operate legally and generate huge revenues. India’s economic salvation lies in making India an easier place to do business in.

We hope our listing of some of the above board Hidden Gems inspires the Indian government to do its bit to bring those that prefer to remain hidden go legit.

Best,
R Jagannathan
Editor-in-Chief, Forbes India
Email: r.jagannathan@network18online.com
Twitter id: @TheJaggi  

(This story appears in the 25 July, 2014 issue of Forbes India. To visit our Archives, click here.)