Editorial: From risk-averse to risk-takers

Unicorns are essentially new enterprises or start-ups that are valued at $1 bn or more. The report, released by a Swiss brokerage firm Credit Suisse, seems to have come as an ego-boost for the local business scene that was reeling from the impact of the global pandemic and the resultant contraction of the Indian economy by 7.1 per cent last year. Encouragingly, two-thirds of these unicorns were formed after 2005, and cover a gamut of industries including pharmaceuticals, biotech, consumer goods, fintech, renewable energy, infrastructure, and technology-enabled enterprises. 

The fact that companies that are 15 years old or even lesser are being valued at billion-dollar rates, should give India Inc some fodder to chew on. It may be recalled that Prime Minister Narendra Modi had referred to desi unicorns during the Prarambh Startup India International Summit, held in New Delhi in January this year. Modi had drawn our attention to the year 2014 when there were only four start-ups in the unicorn club. Eventually, that number had grown to over 30, and now the nation seems to have hit a century in this crowd of young entrepreneurial might. The recent report had also highlighted India’s position of being the eighth largest market globally, trailing nations such as the US, UK, China, HK, and Japan. As yet another proof of the nation’s growing business prowess, it was also revealed that the number of listed companies in the country, with a market capitalisation exceeding $1 bn, has risen from 72 in 2005, to 178 in 2010 and almost doubling to 336 presently. 

Around 20 states in the country have successfully completed the ease of doing business reforms, as per information from the Finance Ministry, released this month. The upside of the states completing such reforms is that they become eligible for an additional borrowing of 0.25 pc of the GSDP (Gross State Domestic Product). This additional grant was approved in May 2020 by the Centre, as part of its plan to incentivise administrations working hard on improving the business climate in their States. 

Contributors to the creation of any vibrant ecosystem of enterprises include a strong backbone of internet and mobile penetration, a highly skilled workforce, quality physical infrastructure, and the availability of private equity (PE) funding, coupled with easier exit protocols for PE investors. Unfortunately, these flashes of brilliance are few and far between. The reality of India Shining paints a drearier picture when it comes to the wellness of small businessmen. Government data revealed the quantum of micro-enterprises set up under the Centre’s pro-entrepreneurship scheme, the PM’s Employment Generation Programme (PMEGP) dipped in FY20 compared to the previous year. In FY19, 73,427 PMEGP micro-enterprises were set-up, while that number trickled down by 9.2 pc in FY20 which saw 66,653 micro-enterprises being formed. 

Stakeholders in the business community have attributed part of this de-growth to COVID-19. But economic reforms that were initiated over half a decade ago, such as the demonetisation and the subsequent roll-out of the GST have continued to haunt the MSME sector in the country. India must address the chasm separating rural or small-town enterprises from their privileged urban counterparts for whom name-dropping fancy venture capitalists have become commonplace. The creation of large pools of risk capital and the triggering of virtuous cycles should not be a phenomenon restricted to urban enterprises catering to urban needs. Venture capitalists must look beyond their comfort zones of tried and tested city-centric enterprises and dig deeper into the soul of small-town entrepreneurs in India.