India has the lowest entrepreneurial exit rate among factor-driven economies and BRICS countries, a survey by Global Entrepreneurship Monitor said, adding that 47% entrepreneurs discontinued because of unprofitable ventures while only 8% made successful exits.
The report added that 22% exits were due to personal reasons while 13% cited financial constraints, among other reasons.
Global Entrepreneurship Monitor measures discontinued business rate as the percentage of individuals aged 18-64 who owned a businesses but discontinued it during the past 12 months.
According to World Economic Forum, countries that compete primarily on the use of unskilled labour and natural resources are categorised as factor-driven economies. In factor-driven economies, companies compete on the basis of price as they buy and sell basic products or commodities. BRICS is an informal association of five major emerging national economies – Brazil, Russia, India, China and South Africa.
Burkina, Faso, Cameron, Senegal, India, Iran, Kazakhstan and Russian Federation are among the factor-driven economies, while Brazil and China are part of the efficiency-driven economies.
The survey also said that almost 79% of early-stage entrepreneurs were motivated to start a venture by some business opportunity in India, which is the highest amongst BRICS economies. Correspondingly, only 19% of early-stage Indian entrepreneurs were forced into entrepreneurship due to a lack of other alternatives, and 34% of the adult population were improvement-driven entrepreneurs.
The consortium surveyed around 3,400 adults across 23 states. “In 2015/16 the improvement-driven entrepreneurial activity in our country was 34.3%, which improved to 43.3% in 2016/17. This shows that during the year, innovations in processes, as well as in business models, have happened in new and existing businesses,” said Sunil Shukla, the Global Entrepreneurship Monitor India team leader and director, EDII-Ahmedabad.
The survey has also come forward with certain recommendations to facilitate government policies around regulatory barriers to growth, availability of liquidity and capital, labour market, research and development, commercialisation and knowledge spill over, taxation, intellectual property rights and bankruptcy.
It also mentioned that there was a need for further capacity building through education and training, restructuring of incentive and tax structures to promote more opportunity-driven entrepreneurship.
Sixty two countries are part of the consortium. The Global Entrepreneurship Monitor India Team comprises Entrepreneurship Development Institute of India (EDII), Ahmedabad (lead institution), Centre for Entrepreneurship Development Madhya Pradesh and Jammu & Kashmir Entrepreneurship Development Institute.