How important is entrepreneurship for the Indian economy?

Entrepreneurship is our most important driver, kicking off a virtuous cycle driving the Indian economy.

1. Entrepreneurship drives business creation: People who are entrepreneurs are constantly innovating, finding new market opportunities and products that can serve them. Anyone who is creating a new business is attempting to do something innovative, pushing both technical and human capabilities.
2. Businesses creation drives value addition: Businesses create products and services that add a lot of economic value. They solve problems for businesses or consumers, and the activities they engage in add value. This value is captured in the GDP and is reflected in the market value - for e.g. venture capital backed companies account for 4.3 trillion of US market cap.
3. Value addition drives job creation: For a country with more than 50% of its population below the age of 25, generating employment is critical. India has a troubling issue where more than 30% of the youth is unemployed - creating jobs is the only solution to this problem which can be destabilizing. Companies that are able to generate value will hire more people to generate even more value.
4. Job creation drives consumption: Once people find employment and have jobs, they have a steady stream of income. With income comes the ability to purchase and consume - a country that has more employed people is also able to spend and consume more.
5. Consumption drives entrepreneurship: As people begin to consume more, a larger market is created. Higher consumption also means varied consumption, people have more evolved needs and wants. Who serves these more complex, large, new needs? Entrepreneurs.

India is incredibly entrepreneurial on a micro scale i.e. as individuals we are incredibly entrepreneurial. You will see this in our daily behavior, as well flourishing tiny businesses (your single corner stores, grocery guy, dhobhi). This is not the poster boy entrepreneurship of our startups, it is what we have been seeing for decades.

Where we need to get better is at a macro scale - the ability to build mammoth businesses and at a faster pace. 40% of the ten largest businesses by market capin India were founded after the 70s (HDFC, Reliance, Infosys and Suzuki). On the other hand, 40% of the ten largest businesses in the US were founded (or had roots) before the 70s (Berkshire, Johnson and Johnson, Exxon and JP Morgan Chase). There is thus more disruption of status quo in the US than India despite the fact that TCS won’t even rank in the top 20 globally on a PPP basis.

We could definitely do with more entrepreneurs!