Only five pc of adult Indians establish own business: survey

Ahmedabad: Eleven per cent of the adult population in India is engaged in “early-stage entrepreneurial activities”, and only five per cent of the country’s people go on to establish their own business, a survey has found. This — 5 per cent — is among the lowest rates in the world, while the business discontinuation rate in India is among the highest at 26.4 per cent, it says.

The survey was conducted among 3,400 respondents aged between 18 and 64 years to assess the level of entrepreneurial activity. According to the Global Entrepreneurship Monitor (GEM) India Report 2016-17, prepared by Gandhinagar-based Entrepreneurship Development Institute of India (EDI) and its associates, 11 per cent of India’s adult population is engaged in “total early-stage entrepreneurial activity (TEA).”

Around 4 per cent of the population accounts for “nascent entrepreneurs,” who are actively engaged in setting up a business they will own or co-own, the report says. Another 7 per cent are the entrepreneurs who are owner-managers of businesses which are running for less than 3.5 years.

Only 5 per cent of the adult population in India manages to establish their businesses, which is to say, their businesses survive for longer than 42 months, the report says. This rate is among the lowest in the world, it adds.

Among the BRICS economies, Brazil has the highest rate of established business ownership (17 per cent) and South Africa has the lowest (3 per cent). China has a slightly higher rate of 8 per cent, while it is 5 per cent in both Russia and India, the report says.

Of those engaged in “TEA” in India, more than half have low-growth expectation, as they “did not intend to expand their employee base,” the report says, adding that 44 per cent expect to hire 1-5 employees over the next five years and only 5 per cent plan to hire more than five employees. At the same time, business discontinuation rate in India is among the highest in the world at 26.4 per cent, it says.

Bureaucratic hurdles lead to business discontinuation in 1.3 per cent of cases. Seven per cent of businesses fail due to financial issues, 6.5 per cent due to personal reasons, 16.9 per cent because of the business turning unprofitable and 58.4 per cent due to other reasons.

Of those engaged in “TEA”, an overwhelming 70.9 per cent are in wholesale and retail trade, 12.1 per cent in agriculture, mining, manufacturing and transportation, 9.3 per cent in health, education, government and social service, 4.5 per cent in ICT and finance, and 3.3 per cent in other sectors.

The figures show a sharp decrease in early-stage entrepreneurial activity in agriculture, which used to be predominant in the previous year at 42 per cent.