Business Environment of India for the last 5 years and development of Entrepreneurship.

India has seen a systematic transition from being a closed to an open economy since the beginning of economic reforms in the country in 1991. These reforms have had a far-reaching impact and have unleashed its enormous growth potential. Today, the Indian economy is characterised by a liberalised foreign investment and trade policy, the larger role played by the private sector and deregulation. India has grown to become a trillion dollar economy with a largely self-sufficient agricultural sector, a diversified industrial base and a stable financial and services sector.

GDP: Among the growing economies of the world, India is second only to China. The countrys GDP has been growing at an average rate of 8.5% for the last five years. Despite the global economic shutdown, its GDP is expected to increase by 7.5% in FY11. Domestic consumption fuelling economic growth: As compared to other countries, India is relatively insulated to external shocks due to strong domestic consumption. Consequently, although the global recession affected the whole world in FY09, India recorded a GDP growth rate of 6.7% during this period. Increasing urbanization and modern technology have brought about a remarkable change in the lifestyles and consumption patterns of Indians. Private domestic consumption accounts for more than 50% of the countrys GDP and is one of the key factors driving overseas investments in the country.

Indias economy has strong fundamentals and is host to several eminent global corporate giants that are leaders in their respective fields; according to the Global Competitiveness Report 2009-10, India occupies the 49th place among 134 countries.

FDIs in India: India ranks third among the most attractive destinations for FDI in the world. Indian markets have significant potential and offer prospects of high profitability and a favourable regulatory regime to pursue investors. Mauritius has been the largest source of FDI inflows into India for many years.

Also from the above figure we can see how the services sector attracts the highest foreign capital in India. A prerequisite for nurturing Entrepreneurship is the creation of a favourable business environment. This goal is at the heart of Indias economic liberalization initiatives. Two key parameters of a conducive business environment include smooth flow of information; ease of starting a business and obtaining various clearances and permits; ease of filing taxes; an efficient legal system; enabling legislations and regulations; absence of corruption; and world-class infrastructure facilities. The entrepreneurs interviewed highlighted some of the critical bottlenecks in this regard, as shown in Figure.

Half of the entrepreneurs have encountered problems relating to obtaining clearances and licenses. Two-thirds have faced hassles while filing taxes. About 60% of the entrepreneurs interviewed have encountered corruption at some point during their entrepreneurial journey. Entrepreneurs have also emphasized the lack of information, as well as poor implementation of government schemes, as significant impediments. About 56% of entrepreneurs stressed that the lack of availability of quality infrastructure transport, power, and telecommunications is a critical problem restricting Entrepreneurship. While India has the potential to derive comparative advantage in human resources, skills, demographic profile and growing domestic demand, recent studies such as the World Bank report Doing Business 2008, rate India poorly on indicators of the business environment. According to the Doing Business report, India ranks 120th out of 178 countries on conducive business environment. There are a number of initiatives at the central and state levels, which aim at improving the ease of doing business. In fact the World Bank- IFC report says that India can jump 55 places from its current rank if some of its own local best practices are adopted nationwide. For example, the Ministry of Company Affairs has initiated the MCA-21 project designed to fully automate all processes related to the proactive enforcement and compliance of the legal requirements under the Companies Act, 1956. Statistics on the growth of Indias technology driven entrepreneurship are telling. In a recent survey by the Deloitte group, India ranks 2nd globally as home to the fastest growing technology firms. 82 Indian companies entered the Deloitte Technology Fast 500 list of Asia- Pacific Companies in 2007 and the companies that have made it to the Technology Fast 50 of India have an average three-year revenue growth of 489%. In this respect, particularly in high skill innovation driven Entrepreneurship, the opportunities offered by complex and interconnected global networks are also relevant. The ability to adapt to changing market conditions and anticipate future technologies and economic trends and leverage across a large number of markets provides opportunities for exploiting economies of scale. As such, comparative knowledge leverage at lower costs would play a key role in the race to achieve economic competitiveness. Recent surveys, such as those undertaken by Goldman Sachs and Pricewaterhouse Coopers, have estimated that India has the potential to be among the worlds leading economies by 2050.22 Further, Indias economy can potentially gain significantly from the countrys characteristic features a democratic open society, a strong technology base (with capacity for leapfrogging), unparalleled

diversity, vibrant capital markets (including growing private equity and venture capital markets), an increasingly youthful population (50% of India is 25 years and younger), a sizeable market of a large number of customers with vast unmet needs as well as an environment of full and free competition in the private sector. Thus, India enjoys enormous potential for the creation of wealth through knowledge. Entrepreneurship and Innovation are the key drivers for generating wealth from knowledge, supported principally by the availability of skilled human resources, access to finance and the ability of the State to create an enabling environment.