Only 5 per cent of adults in Indian establish their own business

In India, about 11 per cent of the population is engaged in “early-stage entrepreneurial activities”. Moreover, a survey has found, merely five per cent of the people in the country go on to launch their own business.

According to the survey, the five per cent is among the lowest rates across the world. However, the business discontinuation rate is among the highest at 26.4 per cent, in India.

In order to assess the level of entrepreneurial activity, the survey was conducted among 3,400 respondents, aged between 18 and 64 years.

The Global Entrepreneurship Monitor (GEM) India Report 2016-17, which is prepared by Gandhinagar-based Entrepreneurship Development Institute of India (EDI) and its associates, says that 11 per cent of India’s adult population is engaged in “total early-stage entrepreneurial activity (TEA)”.

The report says that around four per cent of the population accounts for “nascent entrepreneurs”, who are actively engaged in setting up a business, which they will own or co-own.

Besides, seven per cent people are the entrepreneurs, who are owner-managers of businesses, running for less than 3.5 years.

The report says that in India, only five per cent of adult population manages to establish their businesses. Also, their businesses survive for longer than 42 months.

This rate is among the lowest in the world records, it adds.

Brazil has the highest rate of established business ownership (17 per cent) and South Africa has the lowest (three per cent), among the BRICS economies. Whereas, China has recorded a slightly higher rate of eight per cent, while it is five per cent in both Russia and India, says the report.

In India, of those engaged in “TEA”, more than half have low-growth expectation. This is because they “did not intend to expand their employee base,” says the report.

Also, while 44 per cent expect to hire 1-5 employees over the next five years, only 5 per cent plan to hire more than five employees, it added.

In India, Business discontinuation rate, at 26.4 per cent, is among the highest in the world, at the same time.

The business discontinuation in 1.3 per cent of cases is the result of Bureaucratic hurdles. Where seven per cent of businesses fail due to financial issues, 6.5 per cent due to personal reasons. Further, 16.9 per cent fail because of the business turning unprofitable, and 58.4 per cent due to some other reasons.

Out of those engaged in “TEA”, a strong 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 in the report show a sharp decline in early stage of entrepreneurial activity in agriculture. In the previous year, this used to be predominant, at 42 per cent.