Book Review: India Uninc

In India, one can easily find a strong presence of unincorporated or unregistered establishments. Bazars are replete with such establishments and many people are turning towards starting their own ventures and many of them are necessity-driven entrepreneurs. In this form, family handle a range of activities related to the occupation or business.
But entire sector is far from the gaze of mainstream media as well as academia.
Starting a partnership and proprietorship firm is easiest way to generate income and self-employment in rural areas as well as urban areas. Such entities require a limited investment and minimum paperwork. Such entities are collectively known as unincorporated sector. They have very flexible organizational structure and it is the most striking feature.

India Uninc.
Author: Prof R Vaidyanathan
Price: 395
Publisher: Westland
Pages: 344
Published: 2014

India Uninc is divided in eight sections and each section deals with various topics. First section starts with what constitute the unincorporated sector and its contribution to the national income. Early in the book, author writes, “The unincorporated sector in India contributes about 45% of the national income, which by far surpass the corporate sector’s contribution of around 15% and yet its contribution remains unacknowledged. Also it is important to note that the estimates of this sector in manufacturing and services need to be made more accurate.”
In the second section, Professor R Vaidyanathan sheds light on the much-hyped economic reform (which was initiated in the early nineties) followed by sustained economic growth in India. This section widen horizon of economy and underlines the contribution of unincorporated sector in the economic growth.
Under the formal financial framework, credit delivery to such entities like partnership and proprietorship firm is not adequate. In the third section, Professor Vaidanathan sheds light on credit delivery mechanism in India and role of the non-banking financial entities in the unorganised sector.
Fourth section focuses on taxation and its coverage in India followed by issue of corruption. In its opening chapter, author emphatically writes, “The perception that India is an under-taxed economy is a myth, if one takes into account that endemic issue of under-coverage as well as corruption in the system.”
Various flagship programmes in India are beset with irregularities where intended beneficiaries are unable to reap benefits of such programmes in many cases. In this backdrop, fifth section deals with issue of social security nets in India where a large section of population is excluded from it.
Further it shows how people in India are investing in gold in order to avert unforeseen challenges. He writes, “It is important to note that gold ornaments are used as collateral in the credit markets by the unincorporated sector. Hence gold is a highly liquid asset, portable and easy to transfer, which acts as social security and insurance for the middle and lower class woman as well as collateral for trade.”
Several economists, financial planners and many more assume that the stock market is a barometer of Indian economy. But author questions such assumptions in the sixth section, “The stock market is important to 10 % of the economy and it cannot be categoriesed as a barometer of the economy. Unfortunately, the focus of media and experts is on the stock market only. Perhaps it is more ‘attractive’ compared to dhoti-clad English-ignorant pan chewing India Uninc!”
In Seventh Section, he argues, “Caste has played an important role in the consolidation of business and entrepreneurship in India particularly in the last fifty years. The economic development that has taken place in India Uninc or the partnership and proprietorship activities has been financed by domestic savings and facilitated by clusters and caste and community networks.” Such entrepreneurs are creating better life for themselves and their families in challenging environment.

In Eighth Section, author sheds light on various entities like NGOs, Indian philanthropy, Bollywood, Indian cricket and their association with India Uninc. Auhtor says, “The Indian ethos of giving has been much misunderstood and not stressed on sufficiently enough. Bill Gates and Warren Buffet have been the recipients of much praise, while Indian pioneers like Dayal Singh Majithia are sadly forgotten.”

This book is true to its title and author provides a trove of data from various sources in order to substantiate his arguments. India Uninc is a valuable account which is challenging the conventional wisdom in various ways. In other words, one can say that it’s untold story of economic change in India which is largely ignored. It is more than mere rhetoric. This book will stimulate a wider discussion about contribution of the unincorporated entities in India. It is a story of the billion entrepreneurs in India but it shows that how their contribution to the national income is largely unnoticed. But small initiatives of India Inc is celebrated and labeled as economic milestones. I think that many readers may be familiar with some of the points author makes but everyone will find something to surprise them.

Strategy & Various Concept

Strategy is a Greek derivation. It involves setting up a goal which is followed by mobilization of scares resources then execution. Initially, it was associated with military. In 1960s US-based scholars adopted it in business policy. Later on this term emerged as an crucial part of management theory and managerial practices. In this backdrop, the basic purpose of this blog is to offer a nuanced explanation of STRATEGY as a concept and its relevance.

In Competition & Strategy Working Paper Series by Harvard Business School, Pankaj Ghemawat wrote, “The organizational challenges involved in World War II were a vital stimulus to strategic thinking. The problem of allocating scarce resources across the entire economy in wartime led to many innovations in management science. New operations research techniques (e.g., linear programming) were devised, which paved the way for the use of quantitative analysis in formal strategic planning. In 1944, John von Neumann and Oskar Morgenstern published their classic work, The Theory of Games and Economic Behavior.
This work essentially solved the problem of zero-sum games (most military ones, from an aggregate perspective) and framed the issues surrounding non-zero-sum games (most business ones). Also, the concept of “learning curves” became an increasingly important tool for planning. The learning curve was first discovered in the military aircraft industry in the 1920s and 1930s, where it was noticed that direct labor costs tended to decrease by a constant percentage as the cumulative quantity of aircraft produced doubled. Learning effects figured prominently in wartime production planning efforts.”
Scholars say that World War II encouraged the management to think about strategy in more organized way. But modern business strategy associated with management studies in 1960s. Such approach attracted attention of academia and scholars from various leading universities especially from USA and they postulated various concepts.

Definitions
Alfred Chandler: Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.

Michael Porter: The essence of formulating competitive strategy is relating a company to its environment.

McKinsey & Company: An integrated set of actions designed to create a sustainable advantage over competitors.

Alfred Chandler defined strategy in early 1960 and recognized importance of coordinating management. Several other thinkers and practitioners defined and contributed. Harvard Business School played and is still playing an important role in developing strategy as concept. Initially it was part of their well-known management course on business policy. Industries notes and case studies on several business become part of course curriculum.
In order to understand various business strategies, there is a need to shade light on various frameworks and tools which was developed by various scholars and institutions in several decades. These are:

Concepts & Tools
Competitive advantage
Value Chain
Experience curve
Portfolio theory
Core competency
Generic strategies
SWOT Analysis
Balanced scorecard
Growth–share matrix

Leading Contributors
Peter Drucker(November 19, 1909 – November 11, 2005)
Alfred Chandler (September 15, 1918 – May 9, 2007)
Michael Porter (May 23, 1947)
Henry Mintzberg (September 2, 1939)
Bruce Henderson (1915–1992)
Gary Hamel(1954)
Jim Collins (1958)
Clayton Christensen (April 6, 1952)

Frameworks & Tools

SWOT Analysis: In 1957, Philip Selznick postulated distinctive competence. Later on Kenneth R. Andrews worked on it and emerged as a SWOT analysis.
In 1960s, SWOT Analysis emerged as an indispensable part of the business strategy for many corporations. It comprises four things. These are strength, weaknesses, opportunities and threats of a venture. Several new concepts challenged it.

Balanced Scorecard: Art Schneiderman coined the term – balanced scorecard. Robert S. Kaplan and David P. Norton developed concept of balanced scorecard and initially both introduced balance scorecard in HBR in 1992. Later on, they published a book titled Balanced Scorecard. After its introduction, several companies adopted it as an part of their strategy.
In a paper of Harvard Business Review (Conceptual Foundations of the Balanced Scorecard), Robert S. Kaplan wrote, “The BSC retains financial metrics as the ultimate outcome measures for company success, but supplements these with metrics from three additional perspectives – customer, internal process, and learning and growth – that we proposed as the drivers for creating long-term shareholder value.”
A Balanced Scorecard defines what management means by “performance” and measures whether management is achieving desired results. The Balanced Scorecard translates Mission and Vision Statements into a comprehensive set of objectives and performance measures that can be quantified and appraised. These measures typically include the following categories of performance: Financial performance (revenues, earnings, return on capital, cash flow)
Customer value performance (market share, customer satisfaction measures, customer loyalty)
Internal business process performance (productivity rates, quality measures, timeliness)
Innovation performance (percent of revenue from new products, employee suggestions, rate of improvement index)
Employee performance (morale, knowledge, turnover, use of best demonstrated practices)
Source: http://www.bain.com/publications/articles/management-tools-balanced-scorecard.aspx

Competitive Advantage: It is developed by Michael Porter – a professor at Harvard Business School, USA. Porter is a prolific write on competitiveness and strategy in the world. He authored a book on competitive advantage in 1985 and its title was same.
In Competitive Advantage, Michael Porter wrote, “Competitive advantage is at the heart of a firm’s performance in competitive markets. After several decades of vigorous expansion and prosperity, however, many firms lost sight of competitive advantage in their scramble for growth and pursuit of diversification. Today the importance of competitive advantage could hardly be greater. Firms throughout the world face slower growth as well as domestic and global competitors that are no longer acting as if the expanding pie were big enough for all.”

Value Chain: Value chain is an important concept in business studies which was shaped and popularized by Michael Porter –a leading management guru based in USA.
According to Porter, “ The value chain is a theory of the firm that views the from as being a collection of discrete but related production functions, if production are defined as activities. The value chain formulation focuses on how these activities create value and what determines their cost, giving the firm considerable latitude in determining how activities are configured and combined.”
Value chain of firms in an industry differ, reflecting their histories, strategies and success at implementation.

Experience Curve: The experience curve is developed by Boston Consulting Group and it remains valid in various industries. It’s centered on the relationship between production experience and costs, proved a valuable predictor of competitive dynamics through the 1970s.
In BCG Classics Revisited, Martin Reeves, George Stalk and Filippo L. Scognamiglio Pasini stated, “The experience curve is one of BCG’s signature concepts and arguably one of its best known. The theory, which had its genesis in a cost analysis that BCG performed for a major semiconductor manufacturer in 1966, held that a company’s unit production costs would fall by a predictable amount—typically 20 to 30 percent in real terms—for each doubling of ―experience,‖ or accumulated production volume. The implications of this relationship for business, argued BCG’s founder, Bruce Henderson, were significant.”

Core Competency: Core Competency is a popular concept in the domain of business strategy and it was conceptualized by Late CK Prahlad – a top management thinker.
In Harvard Business Review, Prahlad wrote, “Core competencies are the collective learning in the organisation, especially how to coordinate diverse production skills and integrate multiple streams of technologies.”
According to a publication by Bian & Company, “A Core Competency is a deep proficiency that enables a company to deliver unique value to customers. It embodies an organization’s collective learning, particularly of how to coordinate diverse production skills and integrate multiple technologies. Such a Core Competency creates sustainable competitive advantage for a company and helps it branch into a wide variety of related markets. Core Competencies also contribute substantially to the benefits a company’s products offer customers. The litmus test for a Core Competency? It’s hard for competitors to copy or procure. Understanding Core Competencies allows companies to invest in the strengths that differentiate them and set strategies that unify their entire organization.”.
In BCG Classics Revisted, Martin Reeves, George Stalk and Filippo L. Scognamiglio Pasini stated, “The experience curve is one of BCG’s signature concepts and arguably one of its best known. The theory, which had its genesis in a cost analysis that BCG performed for a major semiconductor manufacturer in 1966, held that a company’s unit production costs would fall by a predictable amount—typically 20 to 30 percent in real terms—for each doubling of ―experience,‖ or accumulated production volume. The implications of this relationship for business, argued BCG’s founder, Bruce Henderson, were significant.”

Growth-share Matrix: Bruce Henderson – founder of the Boston Consulting Group(BCG) developed it in 1970s. The matrix remains highly relevant today as a way of allowing companies to manage strategic experimentation.
Keeping this in view, BCG revisited it and stated, “The matrix helped companies decide which markets and business units to invest in on the basis of two factors—company competitiveness and market attractiveness—with the underlying drivers for Sthese factors being relative market share and growth rate, respectively. The logic was that market leadership, expressed through high relative share, resulted in sustainably superior returns.”

Role of Institutions & Consulting Firms
Harvard Business School
McKinsey & Company
Boston Consulting Group(BCG)
Bian & Company
Accenture

To be continued…

Skilling the Unskilled

Recently, Indian Prime Minister (PM) said that nation needs to think big and focus on skill, scale and speed to get India back on track. It’s not first time PM expressed his concern, but he underscored importance of skill development from various platforms. Keeping importance of skill development in mind, the new government has created a separate ministry for skill development and entrepreneurship. This is an indication that the Union Government is very serious about skill development.
In this backdrop, I am trying to unfold various skill development initiatives in India. They are part of various ministries and organisations ranging from private to public sector.
In the early nineties, the Union Government started economic reform. After this bold policy decision, some sectors witnessed an impressive growth in couple of years. Such growth further created a demand for skilled workforce and industries expressed their concern over unskilled lebour force. Various studies and researches find that there is acute shortage of skilled labour in various sectors and industries are facing the brunt of such shortage. Such situation forced the government to start some serious initiative to lag the gap. Skill development has emerged as force for inclusive development. In last couple of years, India underscored importance of skill development and various players are have involved in skill development initiatives. These are:

(1) Skill Development by the Government
(2) Corporate led Skill Development
(3) Skill Development by International Players
(4) Initiatives by Not-for-Profit
(5) Initiatives by Social Enterprises or Small Ventures

Before delving into detail, I will shed light on existing skill development policy in India. First of all I will discuss national policy on skill development, followed a leading body at the union level and its role in skilling the unskilled in India. Then, I will shade light on involvement of various ministries.

National Policy on Skill Development
In 2009, the Union Government approved the National Policy on Skill Development. It was proposed by the Ministry of Labour and Employment. In order to ensure inclusive development, this policy underscored the importance of increasing productivity. It unlined the importance of  organsied and unorgansied work force.
The salient features of the Policy (1):
(a) Demand driven system guided by labour market signals thereby reducing skills mismatch.
(b) Expansion of outreach using established as well as innovative approaches.
(c) National Vocational Qualifications Framework which will inter alia include opportunities for horizontal and vertical mobility between general and technical education, recognition and certification of competencies irrespective of mode of learning.
(d) System to deliver ‘competencies’ in line with nationally and internationally recognized standards.
e) Focus on new emerging occupations.
(f) Focus on pre-employment training and Lifelong learning
(g) Equity consideration – adequate participation of women, disabled persons and disadvantaged groups including economically backward & minorities – enhancing their access to training; improving employability and increasing employment opportunities.
(h) Stress on research, planning and monitoring
(i) Involvement of social partners – responsibility for management and financing of the system would be shared with all stakeholders and provide greater space for Public Private Partnership.
(j) Promoting excellence.
(k) Use of modern training technologies including distance learning, e-learning, web based learning, etc.
(l) Skill upgradation of trainers, their quality assurance, and improvement of status.

Union Ministries/ Organisations 
National Skill Development Corporation(NSDC)
Labour & Employment
HRD Ministry (HRD Higher Education & HRD Vocational Education)
Road Transport and Highways
Women and Child Development
Micro Small and Medium Enterprises
Rural Development
Agriculture
Textile
Heavy Industry
Urban Development
Construction Industry Development Council (under Planning Commission )
Urban Development
Finance-Insurance/Banking
Information Technology
Consumer Affairs
Social Justice & Empowerment
Overseas Indian Affairs
Chemicals & Fertilizers

National Skill Development Council (NSDC)
In October, 2009, National Skill Development Council was launched by the then Union Finance Minister Pranab Mukherjee. It is incorporated as a not-for-profit organization under Section 25 of the Companies Act, 1956 by the Ministry of Finance. In the NSDC, shareholdings of private and government are 51:49.  In other words one can say that it is a PPP enterprise and emerged as an apex body for skilling and up skilling unskilled workforce in India. 
Speaking on the formal launch, Pranab Mukherjee the then Finance Minister said, “The vision outlined by the Prime Minister’s Council calls for serious up-scaling of the skill development targets. Hence, as against 40 million people currently, who have received any kind of formal or non-formal training, the vision envisages creation of a pool of 500 million skilled people by 2022. This translates into a rapid escalation of the training and skill development capacity, and, a quantum leap in the number of trades, wherein training is currently being imparted through existing institutes. The vision also emphasis, a high degree of inclusivity, which shall effectively deal with the current, divides prevailing in our society, such as gender, rural and urban, organized and un-organized employment, and, traditional and contemporary work places. In order to achieve the mission outlined in the vision, it has become imperative for Government to engage with the private sector, through long term partnerships to achieve synergy in delivery and implementation. The NSDC, therefore, is the important component of the overall roadmap for radically transforming India’s skill landscape.”
With NSDC, seventeen union ministries and departments are associated.  But it comes under the Union finance Ministry. It provides funding to entrepreneurs through equity, loan and grants.

Skill Development: List of Small Ventures (2)
Access Livelihoods
AISECT
Amass Skill Ventures Private Limited
Ants Consulting
Anudip Foundation
Anuna
Apollo Med Skills
Aptech
ARUNIM
Aspiring Minds Assessment Pvt. Ltd.
Avon Facility Management
AVR Edge
AVTEG Pvt Ltd
B – ABLE
Best First Step Education Pvt. Ltd
Calance Software
CAP Workforce Development
Caravan Craft Retail
CENTUM
Cinema Vision
CREDAI
Datapro Computers
Delphi Skill Development Corporation Pvt Ltd (DSDC)
Dialogue in the Dark
Domestic Workforce Services Pvt. Ltd.
Don Bosco Tech Society
Drishtee
Edubridge
Edulight Careers
Emerge Learning Services Pvt Ltd
EMPOWER
Employability Skills Training to rural youth in India
ePalm Leaf
ESMS Esource Consulting
Extramarks Education
F-Tec Skilling India
FUTURE
Future India: The Creative Skills & Innovation Reality Show
Global Talent Track
GLOBSYN
GOLS
GRAM TARANG
GRAS
IAHV
ICA Infotech Private Limited
ICA
ICSS (Pragmatic)
IIGJ
IIJT
IISD
IL&FS Education
IMS Proschool Pvt Ltd
Indus Edutrain Private Limited
Mahindra Special Services Group (MSSG)
Apollo Technical Education Foundation
I-SKILL
Istar
Indus Edutrain Private Limited
Industree Crafts Foundation
Institute of Advanced Security Training & Management
Involute
JBS Academy
Jetking
JobSkills
Kalyani Skills
KarmYog Education Network Pvt. Limited (KEN)
Keertika
Kherwadi Social Welfare Association
LabourNet
Laqsh Job Skills Academy
Laurus Edutech
LIQVID
L S Talent
Mahindra Namaste
Manipal-City & Guilds Skills Training Pvt Ltd (MCG)
Mann Deshi Udyogini (B-school for Rural Women)
Medha Learning
Microspin Machine Works
NIIT
NSHM Skills
Orion Edutech
PANIIT Alumni Reach for India
Pipal Tree
Prakhar Skill Development Academy (Prakhar/SBU)
PRATHAM
Premier Centre For Competency Training Pvt Ltd
Prolific System & Technologies Pvt Ltd
Providers Business Academy
Quivan
Reliance AIMS
Rooman Technologies
Rural Shore
Safeducate
Sahaj eVillage Limited
Saksham
SaltLake Institute of Engineering and Management Limited (‘SLIEM’)
SB Global Educational Resources
Skill Sonics
SkillSource
Skill Tree Consulting
Skill Ventures
Smart Edusol
Stratadigm Education & Training Pvt. Ltd.
Surgeforth Technologies Pvt. Ltd.
Sutra Tri-tech Software Pvt. Ltd.
Suvarna Bharat
SynchroServe Global Solutions Private Ltd
TALENTSPRINT
TeamLease Services Private Limited
Technable
The Unbeatable India
TMI
TVS
24×7 Learning
2COMS Consulting
Value Hub – Skilling and Up-skilling Indian Youth
Vidyanta
Virinchi

Ministry of Labour & Employment
In order to train workforce for industry, the Union Government started Industrial Training Institutes.  According to a document of FICCI – an industry body, “The Directorate General of Employment & Training (DGE&T) had the initiated Craftsman Training Scheme in 1950 by establishing 50 Industrial Training Institutes (ITIs) for imparting skills in various vocational trades to meet the manpower requirements for technology and industrial growth of the country. Since then the demand for skilled manpower has increased substantially due to rapid economic growth, changes in technology and work process, and globalization of economy.”
The Minister of labour & Employment is running this scheme since then. It is certified by International World Organisation (ILO) There are about 200 it is in India run by Indian Government.

Ministry of Human Resource Development
Several decades ago, the Union HRD Ministry started Polytechnics for skill development keeping needs of burgeoning economy.  It offer three year generalized diploma courses in subjects such as civil, electrical and mechanical engineering. The courses are now diversified to include electronics, computer science, medical lab technology, agriculture and hospital engineering. There are 1292 polytechnics under the aegis of the Ministry of Human Resource Development. Since its inception, polytechnic centres trend score of people.

Ministry of Micro Small & Medium Enterprises
The MSME Ministry conducts a number of vocational and entrepreneurship development programmes throughout the country.  They focus on entrepreneurial skills development. Such programmes are associated with various sectrors like food processing, solar power, electronics such programmes help the budding entreprenesu to start their own ventures.


International Collaborations in Skill Development
In order to skill unskilled, the Government is fostering several international collaborations with industrialized countries and leading international bodies.
The UK India Skills Forum (UKISF) established in April 2002 is an initiative led by the UK India Joint Economic and Trade Committee (JETCO). It provides a platform for organizations across the technical and vocational education sectors in UK and India, to tap the business opportunities in the sector by exchanging ideas for delivery of skills training by collaborations between the two countries.(3)

India EU Skills Development Project aims to increase the capacity of policy makers and key counterparts, develop a National Vocational Qualification Framework, and enhance labour market analysis processes. The overall objective of this exercise will be to improve the quality and relevance of training provision and the number of certified skilled labourers in various sectors of employment. The aim of this project on skill development in India is to contribute to achieving rapid and inclusive growth. (4)

Skill Councils in Various Sectors
Aerospace & Aviation Sector Skill Council
Agriculture Sector Skill Council of India
Apparel Made-ups and Home Furnishings Sector Skill Council
Automotive Skills Development Council
Beauty and Wellness Sector Skill Council
BFSI Sector Skill Council of India
Capital Goods Skills Council
Construction Sector Skill Council
Electronics Sector Skill Council
Food Processing Sector Skill Council of India
Gems & Jewellery Sector Skill Council
Healthcare Sector Skill Council
IT-ITeS Sector Skill Council
Indian Plumbing Skills Council
Iron & Steel Sector Skill Council
Leather Sector Skill Council
Life Sciences Sector Skill Council
Logistics Sector Skills Council
Media & Entertainment Skills Council
Mining Sector Skill Council
Power Sector Skill Council
Retailer’s Associations Skill Council of India
Rubber Skill Development Council
Security Knowledge and Skill Development Council
Telecom Sector Skill Council of India
Textile Sector Skill Council
Tourism & Hospitality SSC

References:
(1): http://pib.nic.in/newsite/erelease.aspx?relid=47842
(2) NSDC
(3) http://www.ficci.com/sector/74/Project_docs/SectorProfile.pdf
(4) http://india-euskills.com/

Understanding the Clusters

Recently I completed a short term course on faculty development. During this course, participants were professors, bankers to scientists. All of them were associated with entrepreneurship development in various capacities. There was one group of assistant professors who were associated with a clusters development unit of a leading university. But they were erratic in terms of participation and the resource person was not happy with their performance.  But they become popular among the batch for wrong reasons. And other adult learners started calling them ‘Clusters’. Here my objective is not to discuss what happen in the class but this blog’s basic purpose is to provoke and offer a nuanced explanation of cluster as a concept and its relevance in India.

Cluster:  In 1990, Michael Porter – a well-known professor at Harvard Business School introduced this concept and elaborated it with various examples. Since then, this word has emerged as tool for economic development in various geographies. Several experts, economists and development practitioners did work on this economic concept.

What is a Cluster? In the Harvard Business Review (HBR), Michael Porter wrote, “Clusters are geographic concentrations of interconnected companies and institutions in a particular field. Clusters encompass an array of linked industries and other entities important to competition. They include, for example, suppliers of specialized inputs such as components, machinery, and services, and providers of specialized infrastructure. Clusters also often extend downstream to channels and customers and laterally to manufacturers of complementary products and to companies in industries related by skills, technologies, or common inputs. Finally, many clusters include governmental and other institutions—such as universities, standards-setting agencies, think tanks, vocational training providers, and trade associations—that provide specialized training, education, information, research, and technical support.”

Porter added, “Today’s economic map of the world is dominated by what I call clusters: critical masses—in one place—of unusual competitive success in particular fields. Clusters are a striking feature of virtually every national, regional, state, and even metropolitan economy, especially in more economically advanced nations. Silicon Valley and Hollywood may be the world’s best-known clusters. Clusters are not unique, however; they are highly typical—and therein lies a paradox: the enduring competitive advantages in a global economy lie increasingly in local things—knowledge, relationships, motivation—that distant rivals cannot match.”

Shedding light on this concept, The Economist stated, “Clustering is the phenomenon whereby firms from the same industry gather together in close proximity. It is particularly evident in industries like banking. Banking centres in cities such as London and New York have thrived for centuries. Hundreds of banks cluster there, close together and within easy walking distance of each other. This makes it easier for customers to choose between them, and might be thought to act against each individual bank’s best interests.”

Economist further added, “Modern high-tech clusters often gather round prestigious universities on whose research they can piggyback. Silicon Valley is near Stanford University, for example, and similar high-tech clusters are gathered around MIT near Boston in the United States and around Cambridge University in Britain.
One of the most famous clusters is that of the Hollywood film industry. When the big movie studio system broke up in the 1930s it fractured into a large number of what were essentially small specialist firms and freelancers. Clustering around Hollywood allows each of these small units to benefit as if it had the scale of an old movie studio, but without the rigidities of the studios’ wage hierarchy and unionised labour.”

Emergence of clusters is not restricted to the developed world. Several emerging and developing countries adopted this approach in couple of decades and intensifying economic activities in certain geographies.
In emerging countries, their size varies from small to big. Irrespective of size and scale they create employment for skill workforce. In various cases, the clusters are nurturing innovations and new ideas which are strategically important for them.
Achieving competitiveness and efficiency in various sector, clusters are playing a crucial role where they becoming a backbone of industrial and export production in India.  In India, majority of clusters are associated with micro, small and medium enterprises. They are playing a crucial role in reducing hardship.

Types of Clusters in India
Industrial Clusters
Manufacturing Clusters
Handloom Clusters
University Clusters
IT Clusters
Services Clusters

To diffuse innovation culture, NInC proposes to seed Cluster Innovation Centres (CICs) in industry clusters. This centre will act as a networking hub/arm of the cluster, forge linkages between various stakeholders, initiate and assist innovation activities acting as catalysts and  facilitators. With a lean management structure, this body will aid the cluster and its ecosystem  in connecting with each other, provide guidance to various stakeholders when needed, organize  initiatives to promote growth, channel various incentives that benefit the cluster and act as an  incubating body managing the growth of innovation in the cluster.(1) 

National Innovation Council and Clusters in India
The Union Government set up National Innovation Council in 2010 under Sam Pitroda – a well-known technocrat who headed this apex body. Since its inception National Innovation Council played a crucial role in encouraging innovation and cluster development. NIC did comprehensive studies on various clusters. They gave policy suggestion on various issues related to cluster development and entrepreneurship.

Some new clusters identified by NInC  
Auto Components Cluster – Faridabad, Haryana,
Ayurveda Cluster – Thrissur, Kerala,
Bamboo Cluster – Agartala, Tripura,
Biotech & Pharma Cluster – Ahmedabad, Gujarat,
Brassware Cluster – Moradabad, Uttar Pradesh,
Food Processing Cluster – Krishnagiri, Tamil Nadu
Furniture Cluster – Ernakulam, Kerala

A case study by IIM B Researchers finds, “The Moradabad Brassware Cluster, in Uttar Pradesh, is mainly focused on the export market. The annual turnover of the cluster is over Rs 3,500 crore of which 80% is earned through exports of metalware, including brassware. The cluster has evolved from utilizing only brass a decade ago to now incorporating other metal alloys. Despite growth in the number of exporters in the cluster, there has been a significant decline in the number of artisans due to challenges in living conditions, wages, raw material procurement, prices and stricter international compliance norms.” NInC was closely associated with this study.

Cluster Innovation Centre, University of Delhi
Ministry of Human Resource Development and National Innovation Council started Cluster Innovation Centre (CIC) under the University of Delhi. Cluster Innovation Centre started in 2011. They run B. Tech four years degree in innovation, mathematics etc.According to its official site, these are broad objectives of CIC:
Connecting research with application for the benefit of society
Support application oriented research to solve real world problems
Focus on developing affordable innovations that can benefit a large number of people and at the same time commercially viable and sustainable.
Emergence of cluster as an engine of increasing economic activities depends on various factors. These are location, connectivity, availability of raw material, easily available work force, favourable industrial policies, adequate power supply and strong funding ecosystem. Enabling all these factors of cluster development is not easy. It requires a vision for development and political will.

Reference:

 (1): http://innovationcouncil.gov.in/images/stories/report/Industry_Innovation_Clusters.pdf(2): http://www.innovationcouncil.gov.in/index.php?option=com_content&view=article&id=305:national-innovation-council-success-story-published-in-uns-global-innovation-index-2013-report&catid=14:news&Itemid=13

Rise and Fall of Unincorporated Entities

In India, there are 5.77 crore  unincorporated non-agriculture enterprises (excluding construction) which employ 10.798 crore workers across the country.(1)
Such unincorporated entities goes through various stages. In this entire process, they adopt several approaches but these are unexplored terrain in India. Street vending and its transformation into an enterprise in rural India is truly inclusive in nature. But researchers and media are not concern about their approaches.
This blog’s basic purpose is to provoke and offer a nuanced explanation of what is happening in the unincorporated sector. In following lines, I am narrating two stories. I will take help from Hernando De Soto which is based on his book – The Other Path  in an attempt to give theoretical perspective on street vending.

De Soto writes in his book: “The people who start out street vendors do not do so with the idea of remaining on the street forever, but with the intention of moving at some point to markets away from the public thoroughfare in order to conduct their activities under better conditions. All the traders now working in markets worked on the street at one time or another.”
Recently, I went to my village and I saw Lallan has opened his shop in the town which is close to near T Point. In other words, it’s an interaction zone and people from various region come here and gather or shop. Lallan was a street vendor when I was a small child and he regularly visited the nearby street of my home. At his cycle, he carry a range products from utensil, plastic toys to sweets and pea nuts. We generally bought delicious stuffs from him. His approach was largely based on barter system. One can bought something in exchange of small iron rod or rice. Since form beginning, he worked very hard and devoted several decades in this journey without any regret or disappointment.
Lalan’s story from street vending to his march towards starting a small business in rural India is an apparent trend in India.  It’s story of many entrepreneurs. Having nothing to lose, such street vendors start their journey from scratch. Their aspirations is to build own enterprise and own market in rural hinterland is not adequately chronicled and recognized. But no one can’t ignore them.
Street vending and unincorporated entities face several challenges in country like India. One big challenge is attitude of the Government especially the Urban Bodies towards these establishments. To these micro entrepreneurs, such challenges are very severe in many ways. I following lines, I am trying to narrative a story of micro entrepreneur who hails from Allahabad.
Few months ago, I visited Entrepreneurship Development Institute of India, EDII, Ahmadabad in Gujarat. EDII Campus is located at the outskirts of the city. After two days, I decided to visit city. After crossing Indira Bridge, I find a shop which was close to EDII Campus. I entered into shop and I asked to Bhaiya (Brother) to save and set my hair. After initial conversation with him, I realized that he not ‘LOCAL’ and he either belong to Uttar Pradesh or Bihar. And I asked him about his native place. He responded to me, ‘I am from Allahabad.”  (Allahabad is holy city for Hindus and after 12 years of interval this city hosts a religious Prayag Mela which is very popluar in the world for its management and Millions of devotees come here during Mela from India and rest of the World.)
My guess was right and Allahabad was not new for me. Conversation started and he asked me about my work and what I am doing here? I responded on his queries. When I asked him, Bhaiya why you are here? Is any better prospect or else here? After few seconds, he narrated his story which is very pathetic and I can say that it is not isolated case.
He narrated:
My shop was located in Allahabad, which was near to Prayag Mela. There were scores of shops on both sides of roads. People were earning and saving from these establishments. And fulfilling their everyday needs. In a beautification drive, the State Administration and the Urban Body demolished these shops and evicted their owners from quickly. No mercy. No compensation, nothing. In short time span, these micro entrepreneurs lost everything. Their dreams shattered by their own Government. When Bhaiya narrated his story his eyes were full of tears. He loves Allahabad but he can’t start anything from his beloved place when he born and brought up.
He was very humble and during 10 days of stay I visited him fours times. He never forget to bring TEA for me from nearby shop. Even after my resistance, he brought tea…We finished tea…
His shop is set to run in Gujarat but there is a loneliness of leaving his birthplace, one can easily observe.
Above narrated stories show that how micro entrepreneurs are running their shops or venture after several decades of hard work and toil. But they are unable to resist legally when eviction drive starts. They cannot challenge it in the Court because they are not registered and they don’t have rights where they running their shops. More important thing is lack of political bargaining power. At the considerable extent, they are heterogeneous groups. They don’t have organised associations which can put their demand in an organised manner.

Reference:

http://mospi.nic.in/Mospi_New/upload/Revised_ReportNo546.pdf

Covering Entrepreneurial Ecosystem

In last couple of years, I covered entrepreneurship and solution innovations in India.
Recently one friend suggested me to share all stories on this blog. Keeping his noble suggestion in mind I am sharing few stories and interviews. Your comments and feedback are welcome…

relauncHER: Positive Impact on Women Professionals
After a yearlong study of women careers, Jyotika Singh founded relauncHER in order to remove the barriers and biases related to career breaks and stop penalizing women for the difficult choices they have to make. In an interview, Jyotika highlights several issue related to women’s employment in India: (13 November 2013)  http://www.saharasamay.com/business-news/entrepreneurship/676542554/relauncher-creates-a-positive-impact-on-women-professionals.html

Social Innovation at Work in India
After more than six decades of Independence, the excluded majority in India is grappling with intractable problems where grinding poverty is worsening their conditions. In this backdrop, BMVSS ventured into this segment to reduce social hardship with clear social vision and commitment. (09 November 2013) http://www.saharasamay.com/business-news/entrepreneurship/676542192/social-innovation-at-work-in-india.html

Entrepreneurs in Each Region Should Share their Experiences: Vivek Wadhwa
In an exclusive interview, Vivek Wadhwa, a leading global thinker, sheds light on innovative solutions to plug loopholes. (04 November 2013)  http://www.saharasamay.com/business-news/entrepreneurship/676541850/entrepreneurs-in-each-region-should-share-their-experiences.html

Jugaad is crucial for India: Dr Jaideep Prabhu
Dr Jaideep Prabhu is director of the Centre for India & Global Business at Judge Business School, University of Cambridge, UK. Prabhu is co-author of Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth. In an exclusive interview with Samay Live, Prabhu sheds light on various issues related to entrepreneurship development in India. (02 November 2013) http://www.saharasamay.com/business-news/entrepreneurship/676541756/jugaad-is-crucial-for-india.html

Skill Development by Startups
A lack of suitable skills and unorganized nature of employment created tricky situation for the households in various pockets of urban India. But in last few years, several startups with fledgling ideas ventured into this nascent segment to lag the gap. (October 2013) http://www.linkedin.com/lite/external-redirect?url=http%3A%2F%2Fwww%2Esaharasamay%2Ecom%2Fbusiness-news%2Fentrepreneurship%2F676541048%2Fskill-development-by-startups-in-india%2Ehtml&urlHash=pthw

Energy for All
Clean cooking solutions in developing countries like India are very much an unexplored terrain. In order to provide such solution, new enterprises are venturing into this terrain in the last few years. (29 October 2013) http://www.saharasamay.com/business-news/entrepreneurship/676541402/clean-cooking-solutions-in-india.html

Contributing to the Common Good
India has just entered into social entrepreneurship movement to explore newer and innovative solutions to address the most compelling socio-economic challenges. These young entrepreneurs from all over India are contributing to the common good.  (27 October 2013)

http://www.saharasamay.com/business-news/entrepreneurship/676541055/india-has-just-entered-into-social-entrepreneurship-movement.html

Green Businesses
Sheer amount of electronic gadgets from cheap to high-end have infiltrated every day live in India. Its toxic constituents are posing a big challenge of a different kind where e-waste cycling industry is largely unorganized. At this juncture, some startups have ventured into this uncharted terrain to address growing challenges of e-waste. (26 October  2013) http://www.saharasamay.com/business-news/entrepreneurship/676541045/e-waste-recycling-activities-in-india-2013.html

A New Wave of Social Enterprises
In a bid to provide clean drinking water, a new wave of social enterprises emerged and showed an unleashing potential to tackle social-economic hardships. Such change makers are inspiring the coming generation to tackle the world’s one of the toughest social and environmental challenges.  (October 2013) http://www.saharasamay.com/business-news/entrepreneurship/676541258/a-new-wave-of-social-enterprises.html

Pursuing a Passion
Young students are capable to handle pressure, but maturity is still lacking due to lack of exposure to startups, business and entrepreneurship ecosystem. Article sheds light on the entrepreneurship ecosystem from funding to entrepreneurship development programmes in India.  (October  2013) http://www.saharasamay.com/business-news/entrepreneurship/676541156/the-entrepreneurship-ecosystem-from-funding-to-entrepreneurship-.html

Thriving ‘Kandum’ Business

In Raguvir Nagar of West Delhi, as you walk through the shanty lanes you can easily witness a thriving informal sector. Wherever you look, you can find the heaps of used clothing at centre of business activities. Contrary to previous predictions of eventual demise of this sector at the global level, the informal economy has emerged in new guises.
Kailash who runs a unit of stitching and along with his family he manages to earn the considerable sum and his entrepreneurial endeavor enables a comfortable life. They buy used-clothing from the households that are useless for those people. After loosening stitches, they re-stitch them into various sizes before sell to the traders at nearby Purana Kapada Market.
Mohan  (45 year old) a school dropout from Uttar Pradesh who came in Delhi about 20 years ago with having seventy rupees in pocket now he possessed a piece of land which priced at 75 lakh.  Since then, Mohan is a regular peripatetic trader at Mandi and business of this used clothing gave him everything. Mohan narrated his success story to me. He added that he prefers embroidered garments and jeans. And prices of these embroidered cloths are much higher.
It is not an isolated story of entrepreneurial spirit at back of rubbles but this locality is a cradle of such numerous entrepreneurs. They are blooming on a principle – the fine stitch and the more money and further that is improving overall employment scenario. Same locality is also important for another reason. The government is running a cash transfer initiative instead of food grains through public distribution system but growing entrepreneurial spirit enabling them as self-dependent. They are aware of such initiatives.
When I ventured into nearby Purana  Kapda Vikray Market ( one of the largest  market place for used-clothing) there were forty  to fifty thousand  people, roughly. They vied for lying cloths like trousers, sarees etc. Some of workers were sorting cloths very fast. This market opens at 2 am daily and closes at around 1 pm after floor mopping and cleaning.
There are two types of workforce involved in this market one is self-employed and second one is wage employed. Under the self-employed category, whole families work together and toil for more than eight hours a day. On the other hand, there is another group of people who shorts cloths at piece rates. All most all market participants belong to Gujarat.
If you are regular for some times but you have not enough money to pursue your business then you can borrow easily form informal sector here known as Kishtiya. However, this business does not require a lot of money. Traders come here from Alwar, Gurgaon,  Rohtak  and all nook and corner of Delhi.
However there are no exact figures or data on involving work forces. Traders pay 3 rupees per gathar and if you are buyer of cloths then you will pay five rupees per gather.
These are not survival activities. It provides employment, goods and services for low-income groups. Anonymously these “ultimate entrepreneurs” are contributors to the economy as whole but they are invisible to the glitzy but it does not dampen their enthusiasm.

Entrepreneurship & Indian Policies

In an interaction with a faculty at the leading entrepreneurship development institute lamented over uncertain policy issues related to entrepreneurship. And he said that we don’t have comprehensive entrepreneurship policy at the Union level, it is a policy for MSMEs. In this backdrop, I will shed light on various policy pronouncements by the Union Government in India which is based on publicly available sources.
“The importance of the MSME sector in the growing Indian economy has long been recognized; so also has the fact that the MSME sector faces several major hindrances to growth such as complicated bureaucratic registration procedures, accessing finance and working capital loans from banks and other institutional sources, accessing information and management skills.”(1)

A research study by International Finance Corporation (IFC) stated that the Micro, Small and Medium Enterprise sector is crucial to India’s economy. There are 29.8 million enterprises in various industries, employing 69 million people. The sector includes 2.2 million women-led enterprises (~7.4 percent) and ~15.4 million rural enterprises (51.8 percent). In all, the MSME sector accounts for 45 percent of Indian industrial output and 40 percent of exports. Although 94 percent of MSMEs are unregistered, the contribution of the sector to India’s GDP has been growing consistently at 11.5 percent a year, which is higher than the overall GDP growth of 8 percent. (2)
(Above mentioned figures are based on the Government data and IFC.)

Since Independence to the Sixties, Indian policy makers emphasize on the socialist model of development. During that time span, the Government provided a favorable condition for the State Owned Enterprises (SOEs) in India and the then political leadership leveled them as ‘Temple of Modern India’.  In this backdrop, the Union Government pronounced some policy measures in order to accelerate industrial growth. But the small scale industries remained ignored at the large extent.

The first industrial policy in Independent India announced in April 1948. In order to meet industrial requirement, the Union Government announced industrial policies 1956, 1980 and 1991 which is closely associated with business activities in India. Finally, the Union Government enacted the Micro, Small and Medium Enterprises (MSME) Development Act in 2006.

 

INDUSTRIAL POLICIES & SMALL SCALE INDUSTRIES

Industrial Policy Resolution, 1948: The Policy aimed at outlining the approach to Industrial growth & development. It emphasised the importance to the economy of securing a continuous increase in production and ensuring its equitable distribution

Industrial Policy Resolution, 1956:  Under the Policy the role of State was given more importance as an engine for accelerating the economic growth and speeding up the industrialization as a means of achieving a socialist pattern of society.

Industrial Policy Statement, 1973:  The thrust of this Policy Statement was an identification of high-priority industries where investment from large industrial houses and foreign companies were permitted.

Industrial Policy Statement, 1977:  The Policy emphasized on decentralization and growth of small scale industries

Industrial Policy Statement, 1980:  The Policy einusaged promoting competition in domestic market, technology upgradation and modernization. The policy laid the foundation for an increasingly competitive export based and for encouraging foreign investment in high-technology areas.

Industrial Policy 1991
The main objectives of the Policy were as follows:

• To maintain a sustained growth in productivity and gainful employment and attain international competitiveness.
• Self-reliance or building up the ability to pay our import bills through our own foreign exchange earnings and developing indigenous capacity in technology and manufacturing
• Pursue sound policy framework encompassing encouragement to entrepreneurship, development of indigenous technology, dismantling of the regulatory system
• Development of capital markets and increasing competitiveness
• Spread of industrialization to backward areas through appropriate incentives, institutions and infrastructure investments
• Encourage foreign investment and technology collaboration
• Abolish monopoly of any sector or any individual enterprise in any field of manufacture except on strategic and military considerations and open all manufacturing activity to competition
• Ensure that public sector plays its rightful role in strategic areas of national importance.
• Protect the interests of labour, enhance their welfare and equip them to deal with technology Change
Source: http://eaindustry.nic.in/handbook_200809/Chapter%201.pdf

 

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 seeks to facilitate the development of micro, small and medium enterprises. It provides the first-ever legal framework for recognition of the concept of “enterprise” which comprises both manufacturing and service entities. It defines medium enterprises for the first time and seeks to integrate the three tiers of these enterprises, namely, micro, small and medium.

The Act also provides a statutory consultative mechanism at the national level with balanced representation of all sections of stakeholders, particularly from these three categories.

 

Source: http://pib.nic.in/release/rel_print_page1.asp?relid=46960

This Act emphasized on various issues related to MSME Sector. These are access to financing, skill development, access to market, competitive technology and quality improvement.
In order to promote entrepreneurship in India, several ministries started programmes for intended beneficiaries. Some of them are successful in achieving desired goal but many of them are struggling at the ground level.

National Science & Technology Entrepreneurship Development Board (NSTEDB)
The National Science & Technology Entrepreneurship Development Board (NSTEDB), established in 1982 by the Government of India under the aegis of Department of Science & Technology, is an institutional mechanism to help promote knowledge driven and technology intensive enterprises. The Board, having representations from socio-economic and scientific Ministries/Departments, aims to convert “job-seekers” into “job-generators” through Science & Technology (S&T) interventions.

Major Objectives of NSTEDB
To promote and develop high-end entrepreneurship for S&T manpower as well as self-employment by utilising S&T infrastructure and by using S&T methods.
To facilitate and conduct various informational services relating to promotion of entrepreneurship.
To network agencies of the support system, academic institutions and Research & Development (R&D) organisations to foster entrepreneurship and self-employing using S&T with special focus on backward areas as well.
To act as a policy advisory body with regard to entrepreneurship

The programmes are broadly classified into the following areas:
Training programmes
Entrepreneurship Awareness Camp (EAC)
Entrepreneurship Development Programme (EDP)
Faculty Development Programme (FDP)
Technology Based EDP (TEDP)

Institutional mechanisms for entrepreneurship development
Innovation and Entrepreneurship Development Centre (IEDC)
Science & Technology Entrepreneurship Development (STED) Project
Science and Technology based Entrepreneurship Development (i-STED)
Science & Technology Entrepreneurs Park (STEP)
Technology Business Incubator (TBI)
Information dissemination
Source: http://www.dst.gov.in/scientific-programme/st-nstedb.htm#2


National Scheduled Castes Finance and Development Corporation(NSFDC)
NSFDC was setup by the Govt. of India on February 08, 1989 with the name National Scheduled Castes and Scheduled Tribes Finance and Development Corporation (NSFDC) . It was incorporated as a fully owned Government Company under Section 8 of the Companies Act, 2013.

VISION: Fighting Poverty through Entrepreneurship.
MANDATE: Providing concessional finance for setting up of self-employment projects and skill-training grants to unemployed SC persons living below Double the Poverty Line.
NSFDC: NSFDC is an institution under Ministry of Social Justice & Empowerment, Government of India for financing, facilitating and mobilizing funds for the economic empowerment of persons belonging to the Scheduled Castes families living below Double the Poverty Line. NSFDC finances income generation schemes for the target group through the State Channelising Agencies (SCAs) nominated by respective State/UT Governments.
BROAD OBJECTIVE: NSFDC is the apex institution for financing, facilitating and mobilizing funds from other sources and promoting the economic development activities of the persons belonging to the Scheduled Castes living below double the poverty line.
It has been assigned the task for financing, facilitating and mobilizing funds for the economic empowerment of persons living below Double of the Poverty Line (DPL). It provides financial assistance for income generating schemes for the target group through state Channelising Agencies (SCAs) which are nominated by respective State/UT Government.

This is managed by a Board of Directors with representation from Central Government, State Scheduled Castes Development Corporations, Financial Institutions and non-official members representing Scheduled Castes.
Source: http://www.nsfdc.nic.in/


The Khadi and Village Industries Commission (KVIC)

The Khadi and Village Industries Commission (KVIC) is a statutory body established by an Act of Parliament (No. 61 of 1956, as amended by act no. 12 of 1987 and Act No.10 of 2006. In April 1957, it took over the work of former All India Khadi and Village Industries Board.

Objectives
The social objective of providing employment
The economic objective of producing saleable articles
The wider objective of creating self-reliance amongst the poor and building up of a strong rural community spirit

Functions
The KVIC is charged with the planning, promotion, organisation and implementation of programs for the development of Khadi and other village industries in the rural areas in coordination with other agencies engaged in rural development wherever necessary. Its functions also comprise building up of a reserve of raw materials and implements for supply to producers, creation of common service facilities for processing of raw materials as semi-finished goods and provisions of facilities for marketing of KVI products apart from organisation of training of artisans engaged in these industries and encouragement of co-operative efforts amongst them. To promote the sale and marketing of khadi and/or products of village industries or handicrafts, the KVIC may forge linkages with established marketing agencies wherever feasible and necessary.

The KVIC is also charged with the responsibility of encouraging and promoting research in the production techniques and equipment employed in the Khadi and Village Industries sector and providing facilities for the study of the problems relating to it, including the use of non-conventional energy and electric power with a view to increasing productivity, eliminating drudgery and otherwise enhancing their competitive capacity and arranging for dissemination of salient results obtained from such research.
Further, the KVIC is entrusted with the task of providing financial assistance to institutions and individuals for development and operation of Khadi and village industries and guiding them through supply of designs, prototypes and other technical information.
In implementing KVI activities, the KVIC may take such steps as to ensure genuineness of the products and to set standards of quality and ensure that the products of Khadi and village industries do conform to the standards.
The KVIC may also undertake directly or through other agencies studies concerning the problems of Khadi and/or village industries besides research or establishing pilot projects for the development of Khadi and village industries.
The KVIC is authorized to establish and maintain separate organisations for the purpose of carrying out any or all of the above matters besides carrying out any other matters incidental to its activities.
Source:http://kvic.org.in/index.php?option=com_content&view=article&id=257&Itemid=147

 

Dairy Entrepreneurship Development Scheme (DEDS)

Dairy/Poultry Venture Capital Fund scheme was started in December 2004 with an outlay of Rs. 25.00 Crore.  The fund was released during 2005-06 for the first time for implementation of the scheme. This scheme has been fragmented into two separate scheme viz. Dairy Venture Capital Fund & Poultry Venture Capital Fund from the financial year i.e. 2008-09.
Dairy Venture Capital Fund Scheme (DCVF)) was evaluated by Centre for Management Development (CMD) Thiruvanthapuram, Kerala and final report was submitted by them in the year 2009.  The modification was made under the scheme on the basis of recommendation made in the independent evaluation study done by CMD, changes suggested by the beneficiaries, implementing agency (NABARD) and lead banks.  In the EFC meeting held on 24th June, 2010 under the Chairmanship of Secretary (ADF ,it was decided to modify the Dairy Venture Capital Fund and change it’s name to Dairy Entrepreneurship Development Scheme to make the scheme more effective through  wider coverage, enhanced component-wise outlays and by including new components for assistance under the scheme. The scheme DVCF came to a close on 31st August, 2010. The new modified scheme DEDS was started from 01.09.2010 with an outlay of Rs 250 crore during the 11th Plan.

Objectives of the Scheme
Setting up modern dairy farms for production of clean milk
Encourage heifer calf rearing for conservation and development of  good breeding stock
Bring structural changes in unorganized sector so that initial processing of milk can be taken up at village level.
Up gradation of traditional technology to handle milk on commercial scale
Generate self-employment and provide infrastructure mainly for unorganized dairy sector.

Pattern of assistance
Entrepreneur contribution (Margin)-10% of the outlay (Minimum)
Back ended capital subsidy –25% of the outlay – general category (33.33% for SC/ST farmers)
Effective Bank Loan – Balance portion/Minimum of 40% of the outlay.
Government of India will provide 25% back ended capital subsidy to General category and 33.33% for SC/ST farmers of the cost of project subject to its component wise ceiling which will be adjusted against the last few instalments of repayment of bank loan.

Implementing Agencies: National Bank for Agriculture & Rural Development (NABARD) will be the Nodal Agency for implementation of the scheme. Commercial Banks, Co-operative Banks and Regional Rural and urban Banks will implement the scheme. The scheme is open to organized as well as unorganized sector.

Target group/beneficiaries: The Department has proposed this scheme for dairy development and the eligible beneficiaries of the scheme are agricultural farmers, individual entrepreneurs and groups of unorganized and organized sector. Group of organized sector, includes self-help groups, dairy cooperative societies, Milk unions, milk federation, etc…This scheme shall also help in employment generation at village level as well as Dairy Co-operative Society level.
Source: http://dahd.nic.in/dahd/deds.aspx

 

National Bank for Agriculture and Rural Development

National Bank for Agriculture and Rural Development (NABARD) was set up on 12 July 1982 with the mandate to achieve rural prosperity through credit and related activities. Recognizing the importance of the Rural Non-farm Sector (RNFS) in the faster economic development of rural areas, NABARD had taken a number of initiatives, both with refinance support and promotional assistance, for development of this sector. Of these, Rural Entrepreneurship Development Programme (REDP) is a major promotional initiative, which aims at developing enterprise and creating employment opportunities in rural areas.

Rural Entrepreneurship Development Programme (REDP)
Rural Entrepreneurship Development Programme (REDP) is one of the important NFS promotional programmes supported by NABARD for creating sustainable employment and income opportunities in a cost effective manner for the benefit of educated unemployed rural youth.

Objective: Developing entrepreneurial and activity-oriented skills among unemployed rural youths willing to set up small/ micro-enterprises by assisting Voluntary Agencies (VA)/ Non- Governmental Organisations (NGO)/ Development Agencies (DA)/ RUDSETIs etc. with good track record in conducting REDPs. 

Features and Coverage of REDP
REDP comprises 3 distinct phases, viz., pre-training, training and post-training phase. The success of the programme depends on the strict adherence to these phases.

(i) Pre-training
Detailed survey for identifying potential business activities/ market, publicity, awareness creation and motivational campaign, Coordination with various agencies – especially banks, Government  Department Formation of Selection Committee, Project Monitoring Committee, Selection of trainees etc… 

(ii) Training
The duration of the programme is 6-8 weeks. Training module comprises : Achievement motivation, Opportunity identification and guidance, Knowledge on supporting agencies and schemes, Preparation of project reports/profiles, Management of resources (men, material, money), Marketing aspects, Book-keeping/Accounting. In case of technical/ activity based REDP, inputs on technical aspects/ skill development/appropriate technology will be included. Case-studies on potential activities, field visits, practical work, visit to successful units, etc., to be integral part of training programme

(iii) Post-training
Facilitating credit linkages for setting up units and Escort services to trainees for atleast two years.

Eligible Institutions
NGOs / Voluntary Agencies / Development Agencies and RUDSETI type institutions. NABARD provides promotional assistance to capable agencies with good track record and professional competence to successfully implement REDP.
Source: http://oldsite.nabard.org/nonfarm_sector/pp_de_redp.asp

Small Industries Development Bank of India (SIDBI)
Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an Act of Indian Parliament, is the Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector and for Co-ordination of the functions of the institutions engaged in similar activities. 

Business Domain of SIDBI
The business domain of SIDBI consists of Micro, Small and Medium Enterprises (MSMEs), which contribute significantly to the national economy in terms of production, employment and exports. MSME sector is an important pillar of Indian economy as it contributes greatly to the growth of Indian economy with a vast network of around 3 crore units, creating employment of about 7 crore, manufacturing more than 6,000 products, contributing about 45% to manufacturing output and about 40% of exports, directly and indirectly. In addition, SIDBI’s assistance also flows to the service sector including transport, health care, tourism sectors etc …Source: http://www.sidbi.in/?q=about-sidbi

 

RAJIV GANDHI UDYAMI MITRA YOJANA

It is a scheme of Promotion and Handholding of Micro and Small Enterprises under the Ministry of MSMEs.

Eligibility
Under RGUMY, financial assistance would be provided to the selected lead agencies i.e.  Udyami Mitras for rendering assistance and handholding support to the potential first  generation entrepreneurs. Following agencies/ organizations can be appointed as the lead  agency i.e. Udyami Mitra:
i. Existing national level Entrepreneurship Development Institutions (EDIs).
ii. Micro, Small and Medium Enterprises Development Institutes (MSMEDIs)/  Branch MSMEDIs.
iii. Central/ State Government public sector enterprises (PSEs) involved in  promotion and development of MSEs e.g. National Small Industries Corporation (NSIC) and State Industrial Development Corporations etc.
iv. Selected State level EDIs and Entrepreneurship Development Centers (EDCs) in public or private sectors;
v. Khadi and Village Industries Commission (KVIC).
vi. Special Purpose Vehicles (SPVs) set up for cluster development involved in entrepreneurship development;
vii. Capable associations of MSEs/SSIs;
viii. Other organizations/training institutions/NGOs etc. involved in entrepreneurship development/ skill development.
Source: http://rgumy.nic.in/RGUMY/rgumy_doc/RGUMY_ENGLISH_Booklet_revised_11052010.pdf

 

REFERENCE

(1) http://www.isb.edu/faculty/shamika/MSME%20chapter_Shamika%20Ravi.PDF

(2) Micro, Small and Medium Enterprise Finance in India
A Research Study on Needs, Gaps and Way Forward (November, 2012) by International Finance Corporation (IFC)

Journey of Entrepreneurship

In India, entrepreneurship is becoming a popular subject among students, faculties and researchers. Increasingly, many people ranging from policymakers to media are emphasizing that entrepreneurship is the key to economic development.

The word “Entrepreneur” is a French derivation. In 1755, Richard Cantillon first introduced the term. Cantillion‟s entrepreneur is someone who engages in exchanges for profit; specifically, he is someone who exercises business judgment in the face of uncertainty.

Writing in Harvard Business Review, Geoffrey Jones and R. Daniel Wadhwani said, “During the 1940s and 1950s business historians pioneered the study of entrepreneurship. The interdisciplinary Center for Research on Entrepreneurial History, based at Harvard Business School which included Joseph Schumpeter and Alfred Chandler, and its journal Explorations in Entrepreneurial History were key institutional drivers of the research agenda. However the study of entrepreneurship ran into formidable methodological roadblocks, and attention shifted to the corporation, leaving the study of entrepreneurship fragmented and marginal. Nevertheless business historians have made significant contributions to the study of entrepreneurship through their diverse coverage of countries, regions and industries, and – in contrast to much management research over the  past two decades – through exploring how the economic, social, organizational, and  institutional context matters to evaluating entrepreneurship.”

Since then literature on entrepreneurship has developed and expanded its horizon after interacting with economic theories and business histories. In the following text, I will discuss various theories on entrepreneurship which is postulated by leading experts and economists.

Jean-Baptiste Say: Father of Entrepreneurship
Jean-Baptiste Say was the second author to take an interest in entrepreneurs. He regarded economic development as the result of venture creation, and hoped the English Industrial Revolution would spread to France (Say, 1815, 1816). Cantillon and Say regarded entrepreneurs as risk-takers basically because they invested their own money.

In Cantillon’s view, entrepreneurs bought a raw material – often a farm product – at a certain price, in order to process it and resell it at an uncertain price. Entrepreneurs were therefore people who seized opportunities with a view to making profits, and assumed the inherent risks. Say drew a distinction between the entrepreneur and the capitalist, and between their profits (Say, 1803; 1827: 295; 1815; 1816: 28-29; Schumpeter, 1954: 555).
In doing so, he associated entrepreneurs with innovation. He viewed entrepreneurs as  change agents. He himself was an entrepreneur, and became the first to define the  boundaries of what an entrepreneur, in the modern sense of the term, actually is.
Schumpeter (1954) admitted that a major part of his own contribution was to tell the Anglo-Saxon community about the world of the entrepreneur as described in the writings of Jean-Baptiste Say. As Say was the first to lay a foundation for the field, we have described him as the father of entrepreneurship (Filion, 1988).1
It is perhaps interesting to note that what Say did was basically to draw together two major trends of thought of his time: that of the physiocrats and that of the Industrial Revolution in Great Britain. He was a great admirer of Adam Smith (1776), whose ideas he brought to France, and of the English Industrial Revolution (Say, 1816). In fact, he tried to establish a framework of thought that would enable the Industrial Revolution to move across the Channel to France. He applied the liberal thinking proposed by Quesnay, Mercier de La Rivière, Mirabeau, Condorcet, Turgot and other physiocrats as a means of developing farming, to the entrepreneur.

Joseph Schumpeter on Entrepreneurship
Joseph Schumpeter is seen as the foremost theoretician of entrepreneurship. In addition, Schumpeter, whose “creative destruction” is as famous as Milton Friedman’s “there is no free lunch,” is increasingly recognized as a major economist, often given the same stature as John Maynard Keynes.

Schumpeter spent the last twenty years of his life as a Professor of Economics at Harvard University. English-speaking readers may be familiar with some of his works, especially The Theory of Economic Development and the classic Capitalism, Socialism, and Democracy. However, very few of Schumpeter’s key texts on the entrepreneur and entrepreneurship have been available in English. (2)
W. Michael Cox and Richard Alm write, “Joseph Schumpeter (1883–1950) coined the seemingly paradoxical term “creative destruction,” and generations of economists have adopted it as a shorthand description of the free market’s messy way of delivering progress. In Capitalism, Socialism, and Democracy (1942), the Austrian economist wrote:
The opening up of new markets, foreign or domestic, and the organizational development from the craft shop to such concerns as U.S. Steel illustrate the same process of industrial mutation—if I may use that biological term—that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. (p. 83)

Although Schumpeter devoted a mere six-page chapter to “The Process of Creative Destruction,” in which he described capitalism as “the perennial gale of creative destruction,” it has become the centerpiece for modern thinking on how economies evolve. (4)
Innovation by the entrepreneur, argued Schumpeter, leads to gales of “creative destruction” as innovations cause old inventories, ideas, technologies, skills, and equipment to become obsolete. The question is not “how capitalism administers existing structures…[but] how it creates and destroys them.” This creative destruction, he believed, causes continuous progress and improves the standards of living for everyone.(3)

In online version of Library of Economics and Liberty, Timothy Sandefur stated: “According to Schumpeter, the process of technological change in a free market consists of three parts: invention (conceiving a new idea or process), innovation (arranging the economic requirements for implementing an invention), and diffusion (whereby people observing the new discovery adopt or imitate it). These stages can be observed in the history of several famous innovations. The Xerox photocopier was invented by Chester Carlson,5 a patent attorney frustrated by the difficulty of copying legal documents.6 After several years of tedious work, Carlson and a physicist friend successfully photocopied a phrase on October 22, 1938. But industry and government were not interested in further development of the invention. In 1944, the nonprofit Battelle Corporation,7 dedicated to helping inventors, finally showed interest. It and the Haloid Company (later called Xerox) invested in further development. Haloid announced the successful development of a photocopier on October 22, 1948, but the first commercially available copier was not sold until 1950. After another $16 million was invested in developing the photocopier concept, the Xerox 915 became the first simple push-button plain-paper copier. An immense success, it earned Carlson more than $150 million.8 In the following years, competing firms began selling copiers, and other inventions, such as the fax machine, adapted the technology.”
Sandefur further added, “Schumpeter limited his analysis of innovation to its economic aspects, but Friedrich Hayek pointed out that the same process takes place at the level of social mores and political philosophy. Hayek and his contemporary Karl Popper developed the political theory of the “open society,” stressing the importance of innovation for the discovery and testing of social values. In Hayek’s words, “the existence of individuals and groups simultaneously observing partially different rules provides the opportunity for the selection of the more effective ones.”10 This process, however, creates discomfort as well.” Friedrich Hayek was leading economist. He popularized the Austrian School in economic thinking and various towering figures are associated with this school.

Israel Kirzner and Entrepreneurship
Israel Kirzner(born 1930) refined the academic understanding of entrepreneurship and postulated concepts of entrepreneurial alertness and discovery. His book, Competition and Entrepreneurship criticizes neoclassical theory for its preoccupation with the model of perfect competition, which neglects the important role of the entrepreneur in economic life. His contribution to entrepreneurship is widely recognized.
Russell S. Sobel said in Liberary of Economics and Liberty, “In contrast to Schumpeter’s view, Kirzner focused on entrepreneurship as a process of discovery. Kirzner’s entrepreneur is a person who discovers previously unnoticed profit opportunities. The entrepreneur’s discovery initiates a process in which these newly discovered profit opportunities are then acted on in the marketplace until market competition eliminates the profit opportunity. Unlike Schumpeter’s disruptive force, Kirzner’s entrepreneur is an equilibrating force. An example of such an entrepreneur would be someone in a college town who discovers that a recent increase in college enrollment has created a profit opportunity in renovating houses and turning them into rental apartments. Economists in the modern austrian school of economics have further refined and developed the ideas of Schumpeter and Kirzner.”
For more than three decades, Professor Israel M. Kirzner has developed the economic theory emphasizing the importance of the entrepreneur for economic growth and the functioning of the capitalist process. In his theory building on entrepreneurship, Kirzner links the idea of the highly individual skills and knowledge of man with the entrepreneur of Ludvig von Mises, Kirzner’s teacher and mentor. He has thereby become the single most important scholar in modern Austrian economics. In the 1970s and 1980s he was instrumental in laying the foundation for a new research community in Austrian economics and the theory of the competitive market process.
Kirzner spells out a theory of the entrepreneurial market process that fills the theoretical gap in traditional price theory. The entrepreneur is posited as the prime mover in the economic system and as such s/he is alert to gaps in the market and enticed by the lure of pure profit. The gaps discovered by alert entrepreneurs are continuously closed through arbitrage. The market is depicted as an unending process of the entrepreneurial discovery of opportunities for mutual gain from exchange.(5)

David C. McClelland and Entrepreneurship
In Journal of Enterprising Culture, Louis Jacques Filion wrote in 1997, “For the purposes of this paper, the term “behaviorists” includes the psychologists, psychoanalysts, sociologists and other specialists of human behavior. One of the first authors from this group to show an interest in entrepreneurs was Max Weber (1930). He identified the value system as a fundamental element in explaining entrepreneurial behavior. He viewed entrepreneurs as innovators, independent people whose role as business leaders conveyed a source of formal authority. However, the author who really launched the contribution of the behavioral sciences to entrepreneurship was undoubtedly David C. McClelland.”
According to Filion, McClelland did not define entrepreneurs in the same way as the rest of the literature. His definition was as follows: “An entrepreneur is someone who exercises control over production that is not just for his personal consumption. According to my definition, for example, an executive in a steel-producing unit in the USSR is an entrepreneur.” (McClelland, 1971; see also 1961: 65)

Filion further added, “In fact, McClelland’s (1971) work concentrated on managers of large organizations. Although he is strongly associated with the field of entrepreneurship, a careful reading of his writings shows that he never made a connection between the need for achievement and the decision to launch, own or even manage a business (Brockhaus, 1982: 41). McClelland also identified the need for power, but he paid less attention to this aspect in his later work, and it is less well-known. A number of researchers have studied need for achievement, but nobody seems to have obtained conclusive results that associate it with entrepreneurial success (Durand and Shea, 1974; Hundall, 1971; Schrage, 1965; Singh and Singh, 1972).”

To be continued…

REFERENCE 

(1) http://web.hec.ca/creationdentreprise/CERB_Backup-12-mai-2008/pdf/1997 05EPIEntreprenology.pdf
(2) http://www.sup.org/book.cgi?id=17858
(3) http://www.econlib.org/library/Enc/CreativeDestruction.html
(4) http://www.econlib.org/library/Enc/bios/Schumpeter.html
(5) http://www.eaward.org/web/2006_Israel_M_Kirzner.aspx

Covering Entrepreneurial Ecosystem

Recently one friend suggested me to share all stories on this blog. Keeping his noble suggestion in mind I am sharing few stories and interviews.
In last couple of years, I covered entrepreneurship and solution innovations in India. Here I am posting few stories and interviews. Your comments and feedback are welcome…

relauncHER: Positive Impact on Women Professionals
After a yearlong study of women careers, Jyotika Singh founded relauncHER in order to remove the barriers and biases related to career breaks and stop penalizing women for the difficult choices they have to make. In an interview, Jyotika highlights several issue related to women’s employment in India: (13 November 2013)  http://www.saharasamay.com/business-news/entrepreneurship/676542554/relauncher-creates-a-positive-impact-on-women-professionals.html

Social Innovation at Work in India
After more than six decades of Independence, the excluded majority in India is grappling with intractable problems where grinding poverty is worsening their conditions. In this backdrop, BMVSS ventured into this segment to reduce social hardship with clear social vision and commitment. (09 November 2013) http://www.saharasamay.com/business-news/entrepreneurship/676542192/social-innovation-at-work-in-india.html

Entrepreneurs in Each Region Should Share their Experiences: Vivek Wadhwa
In an exclusive interview, Vivek Wadhwa, a leading global thinker, sheds light on innovative solutions to plug loopholes. (04 November 2013)  http://www.saharasamay.com/business-news/entrepreneurship/676541850/entrepreneurs-in-each-region-should-share-their-experiences.html

Jugaad is crucial for India: Dr Jaideep Prabhu
Dr Jaideep Prabhu is director of the Centre for India & Global Business at Judge Business School, University of Cambridge, UK. Prabhu is co-author of Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth. In an exclusive interview with Samay Live, Prabhu sheds light on various issues related to entrepreneurship development in India. (02 November 2013) http://www.saharasamay.com/business-news/entrepreneurship/676541756/jugaad-is-crucial-for-india.html

Skill Development by Startups
A lack of suitable skills and unorganized nature of employment created tricky situation for the households in various pockets of urban India. But in last few years, several startups with fledgling ideas ventured into this nascent segment to lag the gap. (October 2013) http://www.linkedin.com/lite/external-redirect?url=http%3A%2F%2Fwww%2Esaharasamay%2Ecom%2Fbusiness-news%2Fentrepreneurship%2F676541048%2Fskill-development-by-startups-in-india%2Ehtml&urlHash=pthw

 

Energy for All
Clean cooking solutions in developing countries like India are very much an unexplored terrain. In order to provide such solution, new enterprises are venturing into this terrain in the last few years. (29 October 2013) http://www.saharasamay.com/business-news/entrepreneurship/676541402/clean-cooking-solutions-in-india.html

Contributing to the Common Good
India has just entered into social entrepreneurship movement to explore newer and innovative solutions to address the most compelling socio-economic challenges. These young entrepreneurs from all over India are contributing to the common good.  (27 October 2013)
http://www.saharasamay.com/business-news/entrepreneurship/676541055/india-has-just-entered-into-social-entrepreneurship-movement.html

Green Businesses
Sheer amount of electronic gadgets from cheap to high-end have infiltrated every day live in India. Its toxic constituents are posing a big challenge of a different kind where e-waste cycling industry is largely unorganized. At this juncture, some startups have ventured into this uncharted terrain to address growing challenges of e-waste. (26 October  2013) http://www.saharasamay.com/business-news/entrepreneurship/676541045/e-waste-recycling-activities-in-india-2013.html

A New Wave of Social Enterprises
In a bid to provide clean drinking water, a new wave of social enterprises emerged and showed an unleashing potential to tackle social-economic hardships. Such change makers are inspiring the coming generation to tackle the world’s one of the toughest social and environmental challenges.  (October 2013) http://www.saharasamay.com/business-news/entrepreneurship/676541258/a-new-wave-of-social-enterprises.html

Pursuing a Passion
Young students are capable to handle pressure, but maturity is still lacking due to lack of exposure to startups, business and entrepreneurship ecosystem. Article sheds light on the entrepreneurship ecosystem from funding to entrepreneurship development programmes in India.  (October  2013) http://www.saharasamay.com/business-news/entrepreneurship/676541156/the-entrepreneurship-ecosystem-from-funding-to-entrepreneurship-.html