PROBLEMS OF ENTREPRENEURSHIP IN INDIA:

PROBLEMS AND CHALLENGES

TABLE OF CONTENT

 Declaration… ...................................................................................................................I

 Acknowledgements… ................................................................................................... II

 Introduction ,,,………………………………………………………………………..1

 Research Objectives… ................................................................................................... 2

 Research Methodology.................................................................................................. 2

 Scope of Study ……………………………………………………………………….2

 Chapter 1 – Growth of Entrepreneurship in India ..........................................................3

 Chapter 2 – Problems faced by Entrepreneurs while starting business in India… ..........5

 Chapter 3 – Problems faced by Women Entrepreneurs in India… ............................... 11

 Chapter 4 – Problems faced by Rural Entrepreneurs… ............................................... 14

 Conclusion.................................................................................................................... 16

 References .................................................................................................................... 17

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 Introduction

Entrepreneurship is the process of designing, launching and running a new business, which
is often initially a small business. The people who create these businesses are called
entrepreneurs.

Entrepreneurship has been described as the "capacity and willingness to develop, organize
and manage a business venture along with any of its risks to make a profit. While definitions
of entrepreneurship typically focus on the launching and running of businesses, due to the
high risks involved in launching a start-up, a significant proportion of start-up businesses
have to close due to "lack of funding, bad business decisions, an economic crisis, lack of
market demand, or a combination of all of these."1

The last decade has seen a surge in the number of new ventures in India. The change in
government policies and the shift in business environment have fuelled this unprecedented
growth. However these growth figures do not tell the entire story. Primary studies conducted
on entrepreneurs clearly suggest that they had to fight many odds and an unfriendly
environment just to keep their ventures afloat. When compared to the situation in many
developed and developing countries, the Indian business environment falls well behind on
many parameters for supporting entrepreneurship. India is ranked 77 on the list of ease for
doing business. In-fact, given a choice many Indian entrepreneurs feel that they would have
been better of starting a business in the developed countries than in India. The problems faced
by Indian entrepreneurs include limited access to finance; cumbersome bureaucratic
procedures in setting up, operating, and sustaining a business; poor infrastructure; and the
lack of effective institutional structures. Distribution, cultural bottlenecks and government
regulation were pointed out as three major challenges facing Indian entrepreneurs.

1
Scribd. (2019). _1225 | Entrepreneurship | Tech Start Ups. [online] Available at:
https://www.scribd.com/document/417494723/1225 [Accessed 8 Oct. 2019].

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 OBJECTIVES

 To study the current position of Entrepreneurship in India.

 To define various problems faced by Entrepreneurs while doing business in India.

 To study the problems faced by women Entrepreneurs while starting a business in

India.
 To discuss various problems faced by Rural Entrepreneurs while starting business in
India.

RESEARCH METHODOLOGY
The mode of presentation is descriptive as the project is not empirical in nature. The project
employs secondary mode of data collection as the data is collected from different sources
such as internet, journals, articles, etc

SCOPE OF STUDY
The scope of study is limited to the field of entrepreneurship in India and its role played in
the growth of Indian economy. This study gives special focus towards the problems and
challenges faced by the entrepreneurs while doing business in India market.

2
 CHAPTER 1

GROWTH OF ENTREPRENEURSHIP IN INDIA

From all aspects, considering the diversity and heterogeneity of the Indian population, the
growth of entrepreneurship in India is rather restricted.

This seems to be a surprising anomaly for a country which is supposed to have a

demographic advantage. It is estimated that out of India’s population of 1.40 crores, around
62% are in the workable age group between 17 to 60 years.

Almost 65% of the population is below the age group of 35 years, and again about 54% of the
population is below the age group of 25 years. This means that India is a young country as
compared to many developed nations which are facing a crisis of an ageing and non-working
population.2

Till about a decade back, the overwhelming tendency was to opt for a salaried job and avoid
the risks of running one’s own business. Having a self-run business was considered as the
prerogative of a select few. Most of them were traditional family-run units like traders,
merchants or jewellers.

These were to be preserved and handed over from generation to generation. The age of risk
exposed ventures was considered a hands-off virtual affair. Parents would encourage their
children to score the best of the marks so that they could get secure jobs either in government
or the private sector.

Having a fixed salary was even considered the essential factor in securing a good marriage
pact. Families could not think beyond the stereotyped doctor, lawyer, engineer for their
children.

2
University, B. (2019). Entrepreneurship in India - The Role of Business Schools - Home. [online]
Home. Available at: https://www.bmu.edu.in/social/entrepreneurship-in-india/ [Accessed 10 Oct.
2019].

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Till about the late early 1980s, the government was considered as the safest bet for a job. This
was obviously because the government sector was the biggest generator of jobs and most of
the investments in capital-intensive segments like infrastructure and engineering were
happening from the government side.

Even the banking segment was a governmental domain. The other career options like doctors
and lawyers were considered more of self-made professionals and hardly any form of
entrepreneurship.

It was from the early ’90s onwards when the liberalization reforms saw explosive growth in
the corporate work culture that a slow and steady thought process evolution started to happen.
This would take almost a decade more for a paradigm shift in thinking towards becoming
entrepreneurs.

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 CHAPTER 2

PROBLEMS FACED BY ENREPRENEURS

WHILE STARTING BUSINESS IN INDIA

BUREAUCRACY

Some of the main characteristics of bureaucracy are as follows:

1. Official business is conducted on a continuous basis.

2. Official business is conducted according to written rules.

3. Roles and responsibilities are defined within a hierarchy, with rights of supervision and
appeal.

4. Official and private business and income is strictly separate.

Public offices are set up for the good of the people and the officials manning the posts are
referred to as public servants. But, if left unchecked, these public officials can become self-
serving and corrupt.

Firstly, there are a large number of procedures to be followed and clearances to be obtained
to start and operate a business. Secondly, each of these procedures can take an inordinately
large amount of time.

Procedures are established to safeguard the interest of the common man. But, sometimes, the
rules and regulations stop serving the purpose they were designed for. Rules become
tyrannical in nature and an enormous wasted effort is directed towards compliance with rules
and regulations.

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Lack of resources is one of the major problems faced by entrepreneurial firms. In this
situation, new ventures find it extremely taxing to divert time and attention to time-taking
procedural issues.

CORRUPTION

While under no circumstances, corruption can be justified, it is a bitter truth that it is rampant
in many government departments. Even private sector is not spared by it. We have to make a
collective effort to curb this social evil. As it hampers growth of the business, it is a challenge
for budding entrepreneurs.

Many entrepreneurs have experienced a higher degree of corruption among employees of

large private-sector companies than in the government. Many entrepreneurs have given in to
corruption in some instances but later have fought vehemently against it and succeeded.
There are also some dangerous entrepreneurs who use their access to corrupt officials as a
competitive edge. But, such practice does not give them success in the long run.

Corruption has also spawned a business of ‘consultants’ whose only activity is to mediate
between the corrupt officials and those seeking favours from them. Some entrepreneurs use
them to secure funding from banks, get approvals for constructions, and for periodic
submissions relating to labour laws, taxes, and industrial approvals.

The situation is now changing rapidly and there is hope that corruption will come down in the
near future. The factors likely to lead to a lesser degree of corruption are as follows:

1. There is greater transparency in procedures to be seen across government departments. A

number of departments have initiated e-governance initiatives, which decrease public
interface with officials by enabling registration, filing, payments, and registering complaints
through the Internet.

2. The right to information (RTI) Act has significantly changed the situation by giving greater
access of government records to interested or affected members of the general public.

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3. The media too has played an active and visible role by conducting sting operations to
expose corruption at many levels. The public humiliation suffered by officials caught in these
operations has served as a deterrent to corruption.

LABOUR

Lack of manufacturing capability in India has been attributed to red tapism and corruption,
but the low productivity of labour is also a big factor. In the early days of offshoring, firms
from the US and Western Europe preferred to set up manufacturing facilities in Thailand,
Mexico, and China, rather than in India. Though these countries too had an equally bad
record of red tapism and corruption, the labour in these countries was found to be more
productive.

In spite of our huge population and high economic growth, it was only in 2006 that the
economy of India overtook that of Mexico in terms of GDP.

Since India is a secular country, religious beliefs of every religion are respected. So, it has
holidays on occasions such as Christmas, Good Friday, Holi, Diwali, Muharram, Id-ul-Zuha,
Guru Nanak’s Birthday, Buddha Jayanti, and Mahavir Jayanti. There are also holidays on
occasions of national importance.As a result, the number of working days in a year is
reduced. Furthermore, long breaks in work brought about by bandhs, regional unrest, and
breakdown of supporting infrastructure in times of floods, earthquakes, and other natural
calamities also disrupt the work.

Welfare measures that restrict long hours of work, protect women workers, and prohibit
underage employees are desirable; but, misuse of these clauses to halt legitimate business
practices is harmful for the growth of industry.3

The Indian labour is cheap because of a comparatively low wage structure. But, the
productivity of the cheap labour is not always satisfactory. Employers often need to keep a
regular check on their employees.

3
Conferenceboard.ca. (2019). Entrepreneurial Ambition - Innovation Provincial Rankings - How
Canada Performs. [online] Available at:
https://www.conferenceboard.ca/hcp/provincial/innovation/ambition.aspx [Accessed 11 Oct. 2019].

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Finally, stringent laws governing lay-off of employees make it very difficult to fire workers
in case of non-performance or during times of financial distress when it becomes imperative
to lay-off workers to maintain the financial viability of the business operations.

REGIONAL SENTIMENTS

Many businesses have failed because they failed to take into account the sentiments of the
local population. Many successful businesses have managed to identify and respond to local
sentiments. Many outlets of international fast food chains such as Pizza Hut and McDonald’s
do not serve beef or pork as a sign of respect for local mores. On the other hand, scores of
businesses suffer because of anti-social elements trying to score political points by going on a
rampage.

The local community expects to gain from every business being set up in its vicinity. This is
especially true when businesses come up in economically backward areas with very little
industrialization. The local community expects employment in the firm and does not react
favourably to employment of migrant workers.

In case the business is also planning on marketing its end products in that area, some local
businesses will be adversely affected. It is important to address the concerns of those who
fear for their businesses. Otherwise, they are likely to try their best to drum up for an
organized opposition to your business.

For example, if you are setting up a large biscuit factory, some local bakery owner will fear
that his/her unit will have to close down. The local biscuit factory owner has to be reassured
that the biscuits from your factory are aimed at a different market and are going to compete
with Britannia and Parle and not with him/her. You have to be truthful; lying at this stage will
not be of much use in the long run.

Sometimes, setting up an industrial unit will put pressure on the availability of scarce
resources or might adversely affect the quality of the resources. For example, pollution can
affect the quality of the ground water, or if it is a power-intensive unit, it might affect the
availability of power in the area.

8
In case such adverse reactions from the local population are foreseen, it is usually desirable to
spread the word about the advantages of having the business in the vicinity. Some of the
advantages that can be presented to the local community are growth in employment,
possibility of generating business for service providers such as small transporters and welding
shops, long-term possibility of small ancillary units, and improvement of some local
infrastructure such as roads.

Sometimes, entrepreneurs make goodwill gestures such as donating money to the local puja
committee, buying a computer for the school, or something similar. Overdoing this can
backfire as it can raise the expectation of the local community.

GREY MARKET AND COUNTERFIET GOODS

The grey market refers to the flow of goods through a distribution channel not authorized or
intended by the manufacturer. Usually, this happens when the price of a product in the
domestic market is much higher than in other nearby markets.

Sometimes, this may be because of high local taxation. In India, the goods that are usually
smuggled in are cell-phones, electronic goods, jewellery, and alcohol. It is even suggested
that grey marketing activities can develop a situation of fair competition in which social
welfare increases. In India, the prices of cell-phones used to be very high but rampant
smuggling has prompted a change in taxes and prices, greatly reducing the differential
between India and Singapore or Dubai.

Another problem is that of counterfeit goods. Even though, strictly speaking counterfeit
goods are not part of the grey market, increasingly people are clubbing the two together and
including counterfeit goods in the definition of ‘grey’ products.

The existence of a well-entrenched grey market is a truth in the Indian business scene. The
problem of ‘grey markets’ can be visualized as existing at various levels.

Sometimes, in the case of pirated products, the buyers know that they are buying fake items.
They are willing to buy a product that gives them the same utility as the real product at a
much lower cost. In many parts of India, people make a living by selling pirated copies of

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software, movies, and video games to customers who know that they are buying a pirated
copy for a fraction of the cost of a legally procured copy.4

A new enterprise desirous of building a brand or an image of a manufacturer of high-quality

goods needs to think about a strategy to tackle the problems posed by the grey market.

Fake products are an industry by themselves. There are many shady enterprises
manufacturing fake labels, packaging, etc. There are many products that carry a name similar
to that of the successful product. HUL has identified dozens of manufacturer of washing
powder who sell using a brand name very similar to Surf. This is a direct contravention of the
intellectual property rights of HUL.

4
Jain, S. (2019). 8 inevitable challenges faced by Indian entrepreneurs before starting up. [online]
Entrepreneur. Available at: https://www.entrepreneur.com/article/250647 [Accessed 11 Oct. 2019].

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 CHAPTER 3
PROBLEMS FACED BY WOMEN
ENTREPRENEURS IN INDIA

PROBLEM OF FINANCE

Finance is regarded as “life-blood” for any enterprise, be it big or small. However, women
entrepreneurs suffer from shortage of finance on two counts.

Firstly, women do not generally have property on their names to use them as collateral for
obtaining funds from external sources. Thus, their access to the external sources of funds is
limited.

Secondly, the banks also consider women less credit-worthy and discourage women
borrowers on the belief that they can at any time leave their business. Given such situation,
women entrepreneurs are bound to rely on their own savings, if any and loans from friends
and relatives who are expectedly negligible. Thus, women enterprises fail due to the shortage
of finance.

SCARCITY OF RAW MATERIALS

Most of the women enterprises are plagued by the scarcity of raw material and necessary
inputs. Added to this are the high prices of raw material, on the one hand, and getting raw
material at the minimum of discount, on the other. The failure of many women co-operatives
in 1971 engaged in basket-making is an example how the scarcity of raw material sounds the
death-knell of enterprises run by women.5

5
Worldcat.org. (2019). Entrepreneurship and rural women in India (Book, 2013) [WorldCat.org].
[online] Available at: https://www.worldcat.org/title/entrepreneurship-and-rural-women-in-
india/oclc/823821359 [Accessed 12 Oct. 2019].

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STIFF COMPETITION
Women entrepreneurs do not have organizational set-up to pump in a lot of money for
advertisement. Thus, they have to face a stiff competition for marketing their products with
both organized sector and their male counterparts. Such a competition ultimately results in
the liquidation of women enterprises.

FAMILY TIES
In India, it is mainly a women’s duty to look after the children and other members of the
family. Man plays a secondary role only. In case of married women, she has to strike a fine
balance between her business and family. Her total involvement in family leaves little or no
energy and time to devote for business.

Support and approval of husbands seem necessary condition for women’s entry into business.
Accordingly, the educational level and family background of husbands positively influence
women’s entry into business activities.

LACK OF EDUCATION
In India, around three-fifths (60%) of women are still illiterate. Illiteracy is the root cause of
socio-economic problems. Due to the lack of education and that too qualitative education,
women are not aware of business, technology and market knowledge. Also, lack of education
causes low achievement motivation among women. Thus, lack of education creates one type
or other problems for women in the setting up and running of business enterprises.

MALE DOMINATED SOCIETY

Male chauvinism is still the order of the day in India. The Constitution of India speaks of
equality between sexes. But, in practice, women are looked upon as abla, i.e. weak in all
respects. Women suffer from male reservations about a women’s role, ability and capacity

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and are treated accordingly. In nutshell, in the male-dominated Indian society, women are not
treated equal to men. This, in turn, serves as a barrier to women entry into business.

LOW RISK BEARING ABILITY

Women in India lead a protected life. They are less educated and economically not self-
dependent. All these reduce their ability to bear risk involved in running an enterprise. Risk-
bearing is an essential requisite of a successful entrepreneur.

In addition to above problems, inadequate infrastructural facilities, shortage of power, high

cost of production, social attitude, low need for achievement and socioeconomic constraints
also hold the women back from entering into business.6

6
Your Article Library. (2019). Entrepreneurship | Your Article Library. [online] Available at:
http://www.yourarticlelibrary.com/entrepreneurship [Accessed 14 Oct. 2019].

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 CHAPTER 4
CHALLENGES FACED BY ENTREPRENEURS
IN RURAL INDIA

PAUCITY OF FUNDS
Most of the rural entrepreneurs fail to get external funds due to absence of tangible security and credit
in the market. The procedure to avail the loan facility is too time-consuming that its delay often
disappoints the rural entrepreneurs. Lack of finance available to rural entrepreneurs is one of the
biggest problems which rural entrepreneur is born now days especially due to global recession. Major
difficulties faced by rural entrepreneurs include low level of purchasing power of rural consumer so
sales volume is insufficient, lack of finance to start business, reduced profits due to competition,
pricing of goods and services, Financial statements are difficult to be maintained by rural
entrepreneur, stringent tax laws, lack of guarantees for raising up of loans, difficulty in raising capital
through equity, dependence on small money lenders for loans for which they charge discriminating
interest rates and huge rent and property cost. These all problems create a difficulty in raising money
through loans.7

COMPETITION
Rural entrepreneurs face severe completion of large sized organizations and urban entrepreneurs.
They incur the high cost of production due to high input cost. Major problems faced by marketers are
the problem of standardization and competition from large scale units. They face the problem in
fixing the standards and sticking to them. Competition from large scale units also creates difficulty for
the survival of new ventures.

MIDDLEMEN
Middlemen exploit rural entrepreneurs. The rural entrepreneurs are heavily dependent on middlemen
for marketing of their products who pocket large amount of profit. Storage facilities and poor mean of

7
Iosrjournals.org. (2019). [online] Available at: http://iosrjournals.org/iosr-jbm/papers/vol3-
issue1/D0312329.pdf [Accessed 15 Oct. 2019].

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transport are other marketing problems in rural areas. In most of the villages, farmers store the
produce in open space, in bags or earthier vessels etc. So these indigenous methods of storage are not
capable of protecting the produce from dampness, weevils etc. The agricultural goods are not
standardized and graded.

LACK OF KNOWLEDGE OF I.T

Information technology is not very common in rural areas. Entrepreneurs rely on internal linkages that
encourage the flow of goods, services, information and ideas. The intensity of family and personal
relationships in rural communities can sometimes be helpful but they may also present obstacles to
effective business relationships. Business deals may receive less than rigorous objectivity and
intercommunity rivalries may reduce the scope for regional cooperation. Decision making process and
lines of authority are mostly blurred by local politics in rural areas.

LEGAL FORMILITIES
Rural entrepreneurs find it extremely difficult in complying with various legal formalities in obtaining
licenses due to illiteracy and ignorance.8

8
Anon, (2019). [online] Available at:
https://www.academia.edu/4459283/Rural_Entrepreneurship_in_India_Challenge_and_Problems
[Accessed 15 Oct. 2019].

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 CONCLUSION
Entrepreneurship are certainly act as a key figure in economic progress of India. It plays a

vital role in converting developing country into developed nation. In today’s global market a

country’s economic policy environment must always be favourable for an organization to

achieve efficiency. Economic policy of a country should also enable entrepreneurs to provide

magical touch to an organization irrespective of public, private or joint sector in achieving

innovativeness, speed, flexibility and also strong sense of self determination. Also majority of

the youths do not think of entrepreneurship as a career option. Hence organizations and

government should come with training and sustaining support systems providing all

necessary assistance so that youth can be motivated to take up entrepreneurship as a career.

Besides there should also be efficient regulated markets and governments should also lend its

helping hand in this context. Standardization and grading should be promoted and also

promotional activities should be enhanced to encourage entrepreneurs. NGO‟s should also be

provided full support by the government. In the present context study of entrepreneurship

helps entrepreneurs not only to fulfil their personal needs but also help in economic

contribution of new ventures. More than increasing the national income by creating new jobs,

entrepreneurship also acts a force in economic growth by serving as a major bridge between
innovation and marketplace. To conclude to bring change institutions need to focus on
synergies between education, innovation and entrepreneurship.

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 REFERENCES
I’ve obtained information and taken help of the following sources in order to complete
research on “Entrepreneurship in India: Problems and Challenges”:

 http://www.yourarticlelibrary.com/entrepreneurship

 https://www.entrepreneur.com/article/250647
 International Journal of Advance Research in Computer Science and Management Studies
Kirit Chavda Volume 1, Issue 2, July 2013

 www.iosrjournals.org

 https://www.scribd.com/doc/26661470/Rural-Entrepreneurship-in-India

 https://www.bmu.edu.in/social/entrepreneurship-in-india

 http://www.forbesindia.com/article/spjimr/entrepreneurship-in-india-then-and-
now/46701/1

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