Growth of Entrepreneurship in India
That a proper understanding of the growth of entrepreneurship of any country would evolve within the context of the economic history of the particular country becomes the subject matter of this section. The growth of entrepreneurship in India is, therefore, presented into two sections, viz. Entrepreneurship during Pre- Independence and Entrepreneurship during Post-Independence.
Entrepreneurship during Pre-Independence
The evolution of the Indian entrepreneurship can be traced back to even as early as Rigveda, when metal handicrafts existed in the society. This would bring the point home that handicrafts entrepreneurship in India was as old as the human civilization itself, and was nurtured by the craftsmen as a part of their duty towards the society. Before India came into contact with the West, people were organised in a particular type of economic and social system of the village community. Then, the village community featured the economic scene in India. The Indian towns were mostly religious and aloof from the general life of the country. The elaborated caste- based diversion of workers consisted of farmers, artisans and religious priests (the Brahmins). The majority of the artisans were treated as village servants. Such compact system of village community effectively protecting village artisans from the onslaughts of external competition was one of the important contributing factors to the absence of localisation of industry in ancient India.Evidently, organised industrial activity was observable among the Indian artisans in a few recognizable products in the cities of Banaras, Allahabad, Gaya, Puri and Mirzapur which were established on their river basins. Very possibly, this was because the rivers served as a means of transportation facilities. These artisan industries flourished over the period because the Royal Patronage was to them to support them. The workshops called 'Kharkhanas' came into existence. The craftsmen were brought into an association pronounced as 'guild system'. On the whole, perfection in art, durability beyond doubt and appeal to the eye of the individual were the distinguishing qualities inherent in the Indian craftsmanship that brought much ever lasting laurels of name and fame to the illustrious India in the past. To quote, Bengal enjoyed world- wide celebrity for corah, Lucknow for chintzes, Ahmedabad for dupttas and dhotis, Nagpur for silk-bordered cloths, Kashmir for shawls and Banaras for metal wares. Thus, from the time immemorial till the earlier years of the eighteenth century, India enjoyed the prestigious status of the queen of the international trade with the help of its handicrafts.
Unfortunately, so much prestigious Indian handicraft industry, which was basically a cottage and small sector, declined at the end of the eighteenth century for various reasons. These may be listed as:
1. Disappearance of the Indian Royal Courts, who patronised the crafts earlier;
2. The lukewarm attitude of the British Colonial Government towards the Indian crafts;
3. Imposition of heavy duties on the imports of the Indian goods in England;
4. Low-priced British-made goods produced on large-scale which reduced the competing capacity of the products of the Indian handicrafts;
5. Development of transport in India facilitating the easy access of British products even to far-flung remote parts of the country
6. Changes in the tastes and habits of the Indian, developing craziness of foreign products, and
7. Unwillingness of the Indian craftsmen to adapt to the changing tastes and needs of the people.
Some scholars hold the view that manufacturing entrepreneurship in India emerged as the latent and manifest consequence of East India Company's advent in India. The company injected various changes in the Indian economy through export of raw materials and import of finished goods in India. Particularly, the Parsis established good rapport with the Company and were much influenced by the Company's commercial operations. The Company established its first ship-building industry in Surat where from 1673 onwards the Parsis built vessels for the Company. The most important was shipwright Lowjee-Nushirvan, who migrated to Bombay around 1935. He belonged to a Wadia family which gave birth to many leading ship-builders of Bombay. In 1677, Manjee Dhanjee was given a contract for building the first large gun-powder-mill in Bombay for the East India Company. Besides, a Parsi foreman of a gun factory belonging to the company established a steel industry in Bombay in 1852. On the basis of these facts, it can be stated that the East India Company made some contributions towards entrepreneurial growth in India. But, whether the company did it deliberately for the growth of entrepreneurship in India or it was just a coincidence that people came in contact with the Company and entered the manufacturing, nothing can be said with certitude.
The actual emergence of manufacturing entrepreneurship can be noticed in the second half of the nineteenth century. Prior to 1850, some stray failure attempts were, indeed, made by the Europeans to set up factories in India. In the beginning, the Parsis were the founder manufacturing entrepreneurs in India.
Ranchodlal Chotalal, a Nagar Brahman, was the first Indian to think of setting up the textile manufacturing on the modern factory lines in 1847, but failed. In his second attempt, he succeeded in setting up a textile mill in 1861 at Ahmedabad. But before this, the first cotton textile manufacturing unit was already set up by a Parsi, Cowasjee Nanabhoy Davar in Bombay in 1854 followed by Nawrosjee Wadia, who opened his textile mill in Bombay in 1880. The credit for the expansion of textile industries upto 1915 goes to the Parsis. Out of 96 textile mills existing in 1915, 43 per cent (41) were set up by Parsis, 24 per cent (23) by Hindus, 10 per cent (10) by Muslims and 23 per cent (22) by British citizens. Later, the Parsis invaded other fields, mainly iron and steel industry, also Jamshedjee Tata was the first Parsi entrepreneur who established the first steel industry in Jamshedpur in 1911.
In the first wave of manufacturing entrepreneurship, except Parsis, all others hailed from non-commercial communities. Why the well-known commercial communities, namely, Jains and Vaishyas of Ahmedabad and Baroda, lagged behind in entrepreneurial initiative throughout the nineteenth century can be explained by two factors. Firstly, the improvement of business climate in the countryside during this period resulted in an increase in the quantum of trade which assured quick returns on investments. This proved the commercial activity more lucrative during the period. Secondly, it can also be attributed to their conservative attitude to change from commercial entrepreneurship to industrial entrepreneurship.
The Swadeshi campaign, i.e., emphasis on indigenous goods, provided, indeed, proper seedbed for inculcating and developing nationalism in the country. It was the influence of Swadeshi that Jamshedji Tata even named his first mill 'Swadeshi Mill'. The spirit of indigenousness strengthened its roots so much in the country that the Krishna Mills in its advertisement of Tribune of April 13 made the following appeal: "Our concern is financed by native capital and is under native management throughout".
The second wave of entrepreneurial growth in India began after the First World War. For various reasons, the Indian Government agreed to 'discriminating' protection to certain industries, even requiring that companies receiving its benefits should be registered in India with rupee capital and have a proportion of their directors as Indians. The advantages of these measures were mostly enjoyed by the Indians. The Europeans failed to harness the protectionist policies to their interests. These measures helped in establishing and extending the factory manufacturing in India during the first four decades of the twentieth century. During these decades, the relative importance of Parsis declined and Gujaratis and Marwari Vaishyas gained that pendulum in India's entrepreneurial scene.
The emergence of Managing Agency System which made its own contribution to the Indian entrepreneurship can be traced back to 1936 when Carr, Tagore & Co. assumed the management of Calcutta Steam Tug Association. The credit for this initiation goes to an Indian, Dwarkanath Tagore, who encouraged others to form joint-stock companies and invented a distinct method of management in which management remained in the hands of the 'firm' rather than of an 'individual'. Historical evidences also do confirm that after the East India Company lost monopoly in 1813, the European Managing Agency Houses entered business, trade and banking. And, these houses markedly influenced eastern India's Industrial scene. It is stated that the managing Agency Houses were the real entrepreneur for that period particularly in Eastern India. Brimmer holds the opinion that Agency Houses emerged to overcome the limitations imposed by a shortage of venture capital and entrepreneurial acumen though all may not agree squarely with this view.
Before we skip our review of entrepreneurial growth to the post-Independence era, it will be in the fitness of the things to shed some light on effects of partition on India's industrial economy so as to depict Independent India's industrial background. Some major effects of partition on 15th August 1947 on the Indian industrial economy are shown on preaviour.
Entrepreneurship during Post-Independence
After taking a long sigh of political relief in 1947, the Government of India tried to spell out the priorities to devise a scheme for achieving balanced growth. For this purpose, the Government came forward with the first Industrial Policy, 1948 which was revised from time to time. The Government in her various industrial policy statements identified the responsibility of the State to promote, assist and develop industries in the national interes It also explicitly recognised the vital role of the private sector in accelerating industrial development and, for this, enough field was reserved for the private sector. The Government took three important measures in her industrial resolutions:
1. To maintain a proper distribution of economic power between private and din public sector;
2. To encourage the tempo of industrialisation by spreading entrepreneurship from the existing centres to other cities, towns and villages, and
3. To disseminate the entrepreneurship acumen concentrated in a few dominant orit communities to a large number of industrially potential people of varied social strata.
To achieve these adumberated objectives, the Government accorded emphasis on the development of small-scale industries in the country. Particularly since the Third Five Year Plan, the Government started to provide various incentives and concessions in the form of capital, technical know-how, markets and land to the potential entrepreneurs to establish industries in the industrially potential areas to remove the regional imbalances in development. This was, indeed, a major step taken by the Government to initiate interested people of varied social strata to enter the small-scale manufacturing field. Several institutions like Directorate of Industries, Financial Corporations, Small-Scale Industries Corporations and Small Industries Service Institutes were also established by the Government to facilitate the new entrepreneurs in setting up their enterprises. Expectedly, the small-scale units emerged very rapidly in India witnessing a tremendous increase in their number from 121,619 in 1966 to 190,727 in 1970 registering an increase of 17,000 units per year during the period under reference.
The recapitulation of review of literature regarding entrepreneurial growth in India, thus, leads us to conclude that prior to 1850, the manufacturing entrepreneurship was negligible lying dormant in artisans. The artisan entrepreneurship could not develop mainly due to inadequate infrastructure and lukewarm attitude of the colonial political structure to the entrepreneurial function. The East India Company, the Managing Agency Houses and various socio-political movements like Swadeshi compaign provided, one way or the other, proper seedbed for the emergence of the manufacturing entrepreneurship from 1850 onwards.
The wave of entrepreneurial growth gained sufficient momentum after the Second World War. Since then the entrepreneurs have increased rapidly in numbers in the country. Particularly, since the Third Five Year Plan, small entrepreneurs have experienced tremendous increase in their numbers. But, they lacked entrepreneurial ability, however. The fact remains that even the small entrepreneurship continued to be dominated by business communities though at some places new groups of entrepreneurs too emerged. Also, there are examples that some entrepreneurs grew from small to medium-scale and from medium to large-scale manufacturing units during the period. The family entrepreneurship units like Tata, Birla, Mafatlal, Dalmia, Kirloskar and others grew beyond the normally expected size and also established new frontiers in business in this period. Notwithstanding, all this happened without the diversification of the entrepreneurial base so far as its socio-economic ramification is concerned.
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