Home / Companies / Start-ups /  Only 5% of adult Indians establish their own businesses, finds report

Ahmedabad: Only 11% of adult population in India is engaged in ‘early-stage entrepreneurial activities’, and only 5% of the country’s people go on to establish their own business, a survey has found.

This rate is among the lowest in the world, while the business discontinuation rate in India is among the highest at 26.4%, the report says. The survey was conducted among 3,400 respondents aged between 18 and 64 years to assess the level of entrepreneurial activity.

According to the Global Entrepreneurship Monitor (GEM) India Report 2016-17, prepared by Gandhinagar-based Entrepreneurship Development Institute of India (EDI) and its associates, 11% of India’s adult population is engaged in ‘total early-stage entrepreneurial activity (TEA)’. Around 4% of the population accounts for ‘nascent entrepreneurs’, who are actively engaged in setting up a business they will own or co-own, the report says.

Another 7% are the entrepreneurs who are owner-managers of businesses, which are running for less than 3.5 years. Only 5% of adult population in India manages to establish their businesses, which is to say, their businesses survive for longer than 42 months, the report says. This rate is among the lowest in the world, it adds.

Among the Brics (Brazil, Russia, India, China and South Africa) economies, Brazil has the highest rate of established business ownership (17%) and South Africa has the lowest (3%). China has a slightly higher rate of 8%, while it is 5% in both Russia and India, the report says. Of those engaged in ‘TEA’ in India, more than half have low-growth expectation, as they “did not intend to expand their employee base," the report says, adding that 44% expect to hire one to five employees over the next five years and only 5% plan to hire more than five employees. At the same time, business discontinuation rate in India is among the highest in the world at 26.4%, it says.

Bureaucratic hurdles lead to business discontinuation in 1.3% of cases, 7% of businesses fail due to financial issues, 6.5% due to personal reasons, 16.9% because of the business turning unprofitable and 58.4% due to other reasons. Of those engaged in TEA, an overwhelming 70.9% are in wholesale and retail trade, 12.1% in agriculture, mining, manufacturing and transportation, 9.3% in health, education, government and social service, 4.5% in information and communication technology, and finance, and 3.3% in other sectors.

The figures show a sharp decrease in early stage entrepreneurial activity in agriculture, which used to be predominant in the previous year at 42%.

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