'JUGAAD' ECONOMY

March 22, 2010

India is increasingly important as a laboratory of bottom-up, gritty, individualistic entrepreneurship, different than, say, the Chinese model.   Harvard University's Tarun Khanna, an expert on Chinese and Indian entrepreneurship, has contrasted China's government-driven, top-down style of enterprise with India's "interesting, vibrant way of doing things...in the private sector...far away from government intervention."  Understanding how enterprising individuals in India think and act is important to understanding the larger Indian economy and its future, says Ryan Streeter, a Senior Fellow at the Legatum Institute.

However, little effort has been made to understand entrepreneurs themselves.  For this reason, the Legatum Institute recently conducted a survey of nearly 2400 entrepreneurs, business managers, and aspiring entrepreneurs in India.  The results confirm Khanna's observations and paint a fascinating picture of India's enterprising class, says Streeter.

First of all, optimism about opportunity in India is strong, most of all among lower-income individuals and those whose companies are growing more slowly:

  • Eighty-four percent of business owners whose companies are growing under 15 percent annually believe one can get ahead by working hard in India, compared to 68 percent of those experiencing rates of growth above 50 percent.
  • Nearly half (49 percent) of individuals earning less than $6,500 believe India is a good place for entrepreneurs to succeed, as do 52 percent of those earning between $6,500 and $16,200.
  • Only 28 percent of those earning more than $26,000 believe the same.

These findings suggest a likely willingness to engage in entrepreneurial activity among those who have the most to gain.  It also possibly suggests that those who have already enjoyed success have suffered a few bruises along the way dealing with India's notoriously ineffective bureaucracies and pervasive corruption, says Streeter.

Corruption and bureaucracy are indeed perceived as widespread threats to enterprise:

  • Ninety-three percent of respondents view corruption as a problem, with 53 percent saying they believe that it specifically hurts business.
  • Forty percent say they have been pressured to pay a bribe.
  • Indian entrepreneurs rank government regulations along with access to finance as the biggest barrier to starting and running an enterprise in India.
  • Government bureaucracy is also cited as one of the top three reasons businesses fail in India.

Source: Ryan Streeter, "'Jugaad' Economy," Legatum Institute, March 17, 2010.

 

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