Create a business-friendly ecosystem for youth

VICE-PRESIDENT Jagdeep Dhankhar recently expressed concern at the large number of students going abroad from India. He mentioned the consequential drain of wealth amounted to about $6 billion. This is nearly nine times the current Union budget for higher education. But — and this is important for us to notice — only a small fraction of students from India ever go abroad to study. The majority stay back in India, look for a job or set up a business. Unemployment is not an option.

Yet, there are far too few businesses in India, which continues to have a very narrow manufacturing base. Despite having nearly 13 million graduates, there are a mere 0.25 million formal manufacturing units (Annual Survey of Industries, 2021-22) and 36,359 registered members of key export organisations (Federation of Indian Export Organisations).

Most youngsters desperately look for a job. However, as there are very few jobs available, a large number of youth opt to set up their own business, usually a small one. As per the official data, at least 53 per cent Indian youth are self-employed and like to work in their own locality, preferring to remain within the family-fold. Most of them would rather take an income cut and work from their hometown than look for better opportunities elsewhere.

Given their propensity to work locally, to be self-employed and productive, without breaking the law, the question is: can the government do something to improve the productivity of these young people and improve their quality of life?

Some three decades ago, when the People’s Republic of China faced a similar problem, the government took aggressive steps towards creating what might be called ‘new public commons’. Across nearly 3,000 municipalities, it set up systems that provided cheap housing, quality food, reliable and affordable local transportation, improved law and order. Above all, the government ensured that laws pertaining to work and industry were framed in a simple language and implemented strictly.

Many municipalities competed with one another to be better providers of common services and, thus, attract entrepreneurs. Over the years, only about 300 municipalities changed significantly, but that was enough to create the prosperity that China enjoys today.

So how can one set up an enabling ecosystem in India that does not depend on whom you know but purely on effort and publicly available information?

Few people realise it, but knowledge underpins all actions that go into setting up a business and making it a success. To decide on the kind of products to make, it requires people to research all types of reports and data. Even after setting up a business, its smooth running requires systematic structures to process information about sales, markets, consumers, taxes, regulatory requirements etc.

Knowledge is also needed about the mechanics of actually setting up a business. What kind of permissions are needed; what forms are to be filled; how much margin money is needed for a business loan; what are the factors a banker might consider before extending a loan and so on and so forth.

Knowledge is as good as cash for any business. It would be helpful for everyone if the government could create unstructured spaces for businesses to interact with all kinds of people, especially the young, where relevant information can be exchanged. In olden days, such exchange of information and learning took place in clubs and inns and apprenticeships, often facilitated by universities and colleges.

In India, in the absence of any structured learning, most of the time such practical knowledge comes to a young aspirant through family connections. It is not available easily enough otherwise. Hence, most youth prefer to start local businesses to utilise existing business networks and connections.

To make matters worse, 72 per cent of the youth in India does not proceed for a college education. Under the circumstances, it is all the more important to create social mechanisms for functional knowledge exchange. They include platforms that connect youth to mentors; knowledge parks that provide unstructured spaces for youth, teachers and businesses to interact; formal industry internships. Other ‘new-age commons’ — because these are common facilities open to all for free — could also include, inter alia, an enabling ecosystem that ideally provides safe public spaces with affordable means of connectivity. Free wi-fi and public transport would help enable people connect with one another. In the vast urban agglomerations of today, travelling to meet a person for business costs both time and money. Safe transport would mean a lot, especially for female entrepreneurs. If the low cost of data led to a transformation in communications in India, safe and cheap public transport would improve access exponentially.

One part of an enabling ecosystem that matters almost as much as knowledge is zero tolerance of corruption. The main factor keeping our brightest people away from business is the distaste for having to bribe all sorts of officials all the time.

So strongly is business associated with graft in India that an entirely new term has become popular to distance the one who sets up a non-graft-based business from the normal sort of business. It is called a ‘start-up’. This term is usually used for businesses that are still out of the purview of government officials. Thus, a street vendor who sells food doesn’t call his business a ‘start-up’ even though that is what it is, while a software service agency owner does. The former is under full control of officials and suffers the indignities heaped on him by the corrupt; the latter is not.

China solved its problem of the all-pervasive corruption by publicly executing at least 20 senior public officials and jailing a few hundred minor ones. Perhaps, the time has come for India to learn from China and create an enabling environment for anyone aspiring to set up a business.