Entrepreneurs india2011

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The Legatum Institute Survey of Entrepreneurs INDIA 2011 September 2011 Nathan Gamester

Transcript of Entrepreneurs india2011

Page 1: Entrepreneurs india2011

The Legatum Institute Survey of Entrepreneurs

INDIA 2011

September 2011

Nathan Gamester

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1. What percentage of Indian entrepreneurs believe that India’s economy will be a “much stronger global power” in five years time than it is now?

a) 92%

b) 42%

c) 15%

d) 60%

2. What percentage of 18-34 year olds think that the Indian government is currently doing a “very good job”?

a) Almost none

b) Roughly one in ten

c) Roughly a quarter

d) Roughly a half

3. What proportion of business owners believe that the Indian public places “a lot” of value on the contribution entrepreneurs make to the economy?

a) 12%

b) 70%

c) 47%

d) 4%

4. Residents of which major city are most positive about generally trusting others?

a) Delhi

b) Chennai

c) Kolkata

d) Mumbai

5. When asked if Indian society is more welcoming of entrepreneurs now than 10 years ago, what percentage of business owners responded with “yes, much more”?

a) 90%

b) 49%

c) 10%

d) 2%

6. What percentage of Indians state that the global economic crisis has had a “large negative impact” on the willingness of individuals to start and run their own business?

a) 50%

b) 33%

c) 80%

d) 17%

7. According to business owners, what percentage answered that it has become “much easier” to access finance over the last 12 months?

a) One-half

b) One-quarter

c) Three-quarters

d) Almost none

8. Which group of business owners were the most positive that India’s economy will be a much stronger global power in five years time than it is now?

a) Those with annual revenue of less than or equal to 300,000 rupees

b) Those with annual revenue of 300,001 to 750,000 rupees

c) Those with annual revenue of 750,001 to 1,200,000 rupees

d) Those with annual revenue of 1,200,001 or more rupees

9. In which major city have the highest percentage of people paid a bribe?

a) Delhi

b) Chennai

c) Kolkata

d) Mumbai

10. What percentage of entrepreneurs believe that India will become the most important global power in 20 years time?

a) 10%

b) 93%

c) 56%

d) 74%

QUIZ!

An

swer

s: 1

b, 2

b, 3

c, 4

c, 5

b, 6

d, 7

b, 8

c, 9

a, 1

0c

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THE 2011 LEGATUM INSTITUTE SURVEY OF ENTREPRENEURS: INDIA Page 1

The Legatum Institute Survey of Entrepreneurs:

INDIA 2011Nathan Gamester

THE LEGATUM INSTITUTE IS AN INDEPENDENT NON-PARTISAN ORGANISATION BASED IN LONDON.

WE STAND FOR GROWTH AND GOOD GOVERNANCE. OUR RESEARCH, PUBLICATIONS,

AND PROGRAMMES ADVANCE IDEAS AND POLICIES IN SUPPORT OF FREE AND PROSPEROUS

SOCIETIES AROUND THE WORLD. VISIT US AT WWW.LI.COM.

Author’s Note: The author would like to thank Greg Gardner of the Legatum Institute for his assistance in writing and editing this report, as well as Edo Omic and Freneka Mumford (both of the Legatum Institute) for their contributions towards this report.

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CONTENTS

OVERVIEW 3

SUMMARY FINDINGS 4

OPTIMISM 5

MOTIVATION, INSPIRATION, AND OPPORTUNITY 8

NETWORKS, FAMILY, AND SOCIETY 10

CORRUPTION AND “JUGAAD” 13

FINANCE AND THE ECONOMY 16

GOVERNMENT 19

ENTREPRENEURIAL ENVIRONMENT 22

SAMPLE 24

QUIZ INSIDE FRONT COVER

DATA COMPARISON 2010 VS. 2011 INSIDE BACK COVER

This report is part of a wider series on entrepreneurship that includes surveys on India, China, and Nigeria. To download these surveys and for further information visit www.li.com

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THE 2011 LEGATUM INSTITUTE SURVEY OF ENTREPRENEURS: INDIA Page 3

OVERVIEWOver the last 12 months, the political and economic landscape of most Western economies has been dominated by the fear of a double-dip recession, rising debt levels, and credit rating downgrades. Yet, in India, the outlook remains largely positive as the country continues its rise as an increasingly important global economic power. India’s population now exceeds 1.2 billion1 and its economy continues to grow at one of the fastest rates in the world: GDP growth was 10.4% in 2010 and is predicted to be slower – but still impressive – at 8.2% in 20112.

However, several high-profile corruption scandals over the last year have caused widespread protests and created a sense of public disillusion with the current government. Add to this the fact that double-digit inflation has proved more forthcoming than double-digit growth in recent forecasts, and it is easy to see why question marks have arisen regarding the inevitability of India’s ascent.

Whichever path the Indian economy takes, it is sure that its entrepreneurs – the lifeblood of any thriving economy – will have a significant role to play. Whether they are a sole-trader of a tea stall or a CEO of a multi-billion rupee manufacturing firm, entrepreneurs in all their forms have been instrumental in India’s rapid development since the economic liberalisation 20 years ago. Their decision to take risks, invest in ideas, and develop the goods and services of tomorrow are the reason India is the diversified market economy it is today.

There exists today a multitude of objective data about entrepreneurship. For example we know the average time it takes to start a business in India (29 days)3, the total tax rates faced by Indian entrepreneurs (63%)4, and the number of mobile phones they possess (45 per 100 people)5. But this only provides us with part of the full picture. What is missing is data on how and why Indian entrepreneurs make the decisions they do. What motivates them? Who do they turn to for advice? What is it really like ‘on the ground’ for an entrepreneur in India?

This survey provides such insight as it aims to ‘get inside the minds’ of India’s large and growing pool of entrepreneurs. For the third consecutive year, the Legatum Institute, in conjunction with YouGov, has surveyed a panel of over 2,000 Indian business owners and entrepreneurs to provide insight into the characteristics of India’s current and future growth, as an economy and as a nation.

1 Census of India 2011, Provisional Population Totals, (New Delhi: Government of India, 2011)2 International Monetary Fund, World Economic Outlook 2011, (Washington DC: IMF, 2011) 3 International Finance Corporation and World Bank, Doing Business 2011, (Washington DC: World Bank, 2011)4 Ibid.5 World Bank, World Development Indicators 2011, (Washington DC: World Bank 2011)

THIS SURVEY PROVIDES SUCH

INSIGHT AS IT AIMS TO ‘GET

INSIDE THE MINDS’ OF INDIA’S

LARGE AND GROWING POOL

OF ENTREPRENEURS

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SUMMARYPervasive optimism is the dominant theme in this year’s survey, although paradoxically it is clear that there are growing concerns regarding corruption. The outlook among India’s entrepreneurs is generally positive and extremely so on several fronts: almost 70 per cent think India is currently heading in the right direction and even more are confident their country will be a stronger economic power in five years time. A considerable majority of Indian entrepreneurs are equally positive about trust in society and their government’s policies to make India business friendly.

Despite such optimism, a note of caution: compared to their elder counterparts, India’s younger generation of entrepreneurs are consistently less optimistic about the future, less trusting of society, and less approving of government. However, this 18-34 year old group still see a positive future for India, indicating more an empowered generation willing to speak out, rather than a cohort of discontented revolutionaries.

The second major finding was that not only is dissatisfaction concerning corruption very high – more than nine in 10 entrepreneurs think it is a problem – but 80% believe the problem to be getting worse. Should such a trend continue, the prospects for entrepreneurs may diminish and the aforementioned optimism could wane.

Regardless, for now entrepreneurship in India is in good shape and it is not only the abundant optimism that indicates growth will continue. The communications and IT sector is viewed as having the best growth prospects, but several other sectors are also viewed very positively. The evidently strong motivation of “being your own boss”, reports of easier access to finance, and the fact that 84 per cent of Indian entrepreneurs view their country as a good place to succeed are all reasons to believe India’s reputation as a beacon of entrepreneurship will be justified for some years to come.

INDIA’S REPUTATION

AS A BEACON OF

ENTREPRENEURSHIP WILL

BE JUSTIFIED FOR SOME

YEARS TO COME

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OPTIMISM

Indian entrepreneurs show deep levels of optimism

both for the future of their country and for the

economic possibilities available to them. Perhaps

most strikingly, over half of all Indian entrepreneurs

believe that India will be the most important global

economic power in 20 years time.

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OPTIMISM

69% right direction 27% wrong direction 5% don’t know

Right direction 69%

Wrong direction 27%

Don’t know 3%

More than two-thirds of Indian entrepreneurs believe India is heading in the right direction: 69 per cent said things in India are currently going in the right direction, while only 27 per cent of entrepreneurs think things are heading in the wrong direction.

Do you think things in India are currently going in the right or wrong direction?

Most Indian entrepreneurs believe that hard work will get them ahead financially: 78 per cent said “yes” – a higher percentage than in 2010 – while only 21 per cent of entrepreneurs believe that hard work won’t get you ahead financially.

This optimism seems to grow with age. While 62 per cent of 18-34 year olds think India is heading in the right direction, this increases to 66 per cent in the 35-54 age bracket, and even more so to 73 per cent for over 55 year olds.

18-3

4 ye

ars

35-5

4 y

ears

over

55

year

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40%

60%

80%

100%

62%66%

73%

age bracket

perc

enta

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69%

27%

3%

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THE 2011 LEGATUM INSTITUTE SURVEY OF ENTREPRENEURS: INDIA Page 7

[q9] Looking ahead, where do you see India’s economy headed in the next 5 years? %India’s economy will be a much stronger global power than it is now 42India’s economy will be a stronger global power than it is now 44India’s economy will be about the same in global terms as it is now 11India’s economy will be a weaker global power than it is now 2India’s economy will be a much weaker global power than it is now 1Don't know 1

[q11] And looking further ahead, which country do you think will be the most important global economic power in 20 years time? (Please tick one option) %Brazil 1China 26India 56Germany 2Japan 4Russia 1United Kingdom 2United States 8Other 0Don't know 1

Getting access to finance over the last 12 months Easier: 68 per cent of entrepreneurs25 per cent “much easier”3 per cent “much harder” 15 per cent “somewhat harder”

India’s economy will be a much stronger global power than it is now 42%

India’s economy will be a stronger global power than it is now 44%

India’s economy will be about the same in global terms as it is now 11%

India’s economy will be a weaker global power than it is now 2%

India’s economy will be a much weaker global power than it is now 1%

Don’t know 1%

Looking ahead to the next five years, India’s entrepreneurs are optimistic about their country’s standing on the world stage with 86 per cent believing India will be a stronger power than it is now, and 42 per cent of those believing it will be “much stronger”. Only 11 per cent believe it will be about the same as it is now and just three per cent believe it will be a weaker power than it is now.

Looking further ahead, most Indian entrepreneurs believe India will be the most important global economic power in 20 years (56 per cent), followed by China (26 per cent). The US is not regarded highly here, with only eight per cent of entrepreneurs believing it will be the most important economic power in 20 years. Brazil, Germany, Japan, Russia, and the UK are barely considered, receiving just 10 per cent, combined.

Brazil 1%

China 26%

India 56%

Germany 2%

Japan 4%

Russia 1%

United Kingdom 2%

United States 8%

Don’t know 1%

In assessing the overall level of opportunity available in India, entrepreneurs perceive India to be a good place to succeed. When asked whether India overall is a good or bad place for entrepreneurs to succeed, 84 per cent state that they think it is a good place, with one-third of respondents claiming it is a “very good” place. This optimism remains consistent across all age categories, all growth rates of business, and all sizes of business, both in terms of the number of employees and annual revenue.

Looking ahead, where do you see India’s economy headed in the next five years?

And looking further ahead, which country do you think will be the most important global economic power in 20 years time?

[q9] Looking ahead, where do you see India’s economy headed in the next 5 years? %India’s economy will be a much stronger global power than it is now 42India’s economy will be a stronger global power than it is now 44India’s economy will be about the same in global terms as it is now 11India’s economy will be a weaker global power than it is now 2India’s economy will be a much weaker global power than it is now 1Don't know 1

[q11] And looking further ahead, which country do you think will be the most important global economic power in 20 years time? (Please tick one option) %Brazil 1China 26India 56Germany 2Japan 4Russia 1United Kingdom 2United States 8Other 0Don't know 1

Getting access to finance over the last 12 months Easier: 68 per cent of entrepreneurs25 per cent “much easier”3 per cent “much harder” 15 per cent “somewhat harder”

42%

44%

11% China

India

US

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MOTIVATION, INSPIRATION, AND OPPORTUNITY

The desire for independence is cited as the main

motivation for starting a business, while having suitable

access to finance is cited as the most helpful factor.

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MOTIVATION, INSPIRATION, AND OPPORTUNITY

When asked the reason they became entrepreneurs, 12 per cent of respondents stated that they had no other employment options, so became an entrepreneur out of necessity in order to get by. The overwhelming majority, 88 per cent, had employment options but chose to pursue their entrepreneurial aspirations.

When asked for the main motivation for starting their own business, Indian entrepreneurs primarily cite being independent (46 per cent) followed by the desire to make more money (25 per cent). Interestingly, these are also the top two reasons cited by aspiring entrepreneurs for wanting to start a business. Only 14 per cent of Indian entrepreneurs cite their main motivation for starting their business as the desire to exploit an opportunity to develop a product or service, and only eight per cent do it to be innovative.

WHAT WAS YOUR MAIN MOTIVATION IN STARTING YOUR OWN BUSINESS?

ENTREPRENEURSASPIRING

ENTREPRENEURS

To make more money 25 17

To be independent and “be my own boss” 46 49

To exploit an opportunity to develop a product or service 14 12

To be innovative 8 12

To make a difference for society 6 10

Other 1 0

The most helpful factor in becoming an entrepreneur is the ability to access finance. This is cited by 31 per cent of entrepreneurs as the most helpful factor followed by knowing another entrepreneur which 24 per cent state is the most helpful factor.

Most Indian entrepreneurs believe that Indians tend to be more entrepreneurial people compared to the people of other countries: 73 per cent think Indians are more entrepreneurial, with 34 per cent of those stating Indians are “a lot more” entrepreneurial. Only 12 per cent think that Indians are equally entrepreneurial compared to other nationalities, with a further 14 per cent thinking that Indians are less entrepreneurial.

When asked where entrepreneurs gain their desire to become entrepreneurs, the highest response was that of knowing another entrepreneur (32 per cent), closely followed by family (30 per cent). The other most frequent responses were social networks and previous business experience both of which were cited by 11 per cent of entrepreneurs. Interestingly, in responding to the same question, a much higher percentage of 18-34 year olds cite the influence of school/university than elder entrepreneurs.

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NETWORKS, FAMILY, AND SOCIETY

Levels of trust have risen in the past year but

are not yet as high as two years ago and the

social impact of business is still very important

for Indian entrepreneurs.

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THE 2011 LEGATUM INSTITUTE SURVEY OF ENTREPRENEURS: INDIA Page 11

NETWORKS, FAMILY, AND SOCIETY When asked if in general people can be trusted, 60 per cent of Indian entrepreneurs answered “yes”. This

is higher than 2010 (54 per cent) but not as high as 2009 (74 per cent).

Interestingly, when looking at the total respondents, females are far less trusting than males: equal numbers of women answered “yes” and “no” to this question, whereas significantly more males answered “yes” (58 per cent) compared to “no” (37 per cent).

The proportion of over 55 year olds who think people cannot be trusted is just 20 per cent, which is less than half the percentage of 18-34 year olds who believe people cannot be trusted (42 per cent), signifying a more sceptical and distrusting younger generation.

Just under half (49 per cent) of Indian entrepreneurs believe that Indian society is “much more” welcoming of entrepreneurs than it was 10 years ago. A further 43 per cent believe it is “somewhat more” welcoming, while only five per cent think it is “about the same” as it was 10 years ago.

As already mentioned, the most helpful factor to starting a business is having access to finance (31 per cent). However, the second and third highest responses are, knowing another entrepreneur (24 per cent) and having support from family (18 per cent), signifying a reliance on networks and family in becoming an entrepreneur.

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40

50

60

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Yes No

2011

Yes No

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74%

22%

54%

41%

60%

37%

Do you generally think people can be trusted?

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When it comes to seeking advice and help, there is a difference in response from entrepreneurs compared to senior managers. Entrepreneurs primarily consult family and friends (29 per cent) as well as other entrepreneurs (26 per cent), while senior managers consult professional consultants and business journals (30 per cent).

WHEN YOU HAVE QUESTIONS OR NEED INFORMATION TO MAKE IMPORTANT BUSINESS DECISIONS, WHO DO YOU TURN TO FOR ADVICE?

ENTREPRENEURS SENIOR MANAGERS

Consult other entrepreneurs 26 14

Read business journals, publications, and websites 23 30

Consult family and/or friends 29 13

Consult your colleague(s) in your company 6 10

Professional consultants 13 30

Don't know 1 2

When asked about the social impact of their work, 92 per cent of Indian entrepreneurs say that it is important with 65 per cent stating that it is “very important” and is a main motivation for what they do.

Female respondents consider the social impact of their work more than their male counterparts do – 71 per cent of women citing it as a main motivation, compared to 62 per cent of men.

When asked what entrepreneurs believe is the biggest positive effect of their business on others besides creating value and satisfying customers, 40 per cent say it is improving the quality of life in the community where they work. The next most common answer was making an impact on the standards and ethics in the entrepreneur’s profession (29 per cent).

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THE 2011 LEGATUM INSTITUTE SURVEY OF ENTREPRENEURS: INDIA Page 13

CORRUPTIONAND “JUGAAD”

Corruption continues to be a serious problem

that hurts business in India and the proportion of

entrepreneurs who think corruption is getting worse

has risen in the past 12 months.

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CORRUPTION AND “JUGAAD”

When asked whether corruption was a problem that hurts business, 91 per cent of Indian entrepreneurs said that it was a problem, with 65 per cent of those stating it was a “serious problem”. This has not changed since 2010 but it is an increase from 2009 when only 56 per cent cited corruption as a “serious problem” that hurts business in India.

Of India’s six largest cities (Bangalore, Chennai, Delhi, Kolkata, Hyderabad and Mumbai), the capital city Delhi is where the biggest percentage of resident entrepreneurs report corruption as being a “serious problem”.

Most worryingly for Indian business, 80 per cent of entrepreneurs say that overall corruption is getting worse. Furthermore, the number of entrepreneurs who think corruption is getting “much worse” has risen by five per cent since 2010. Now, more than half (52 per cent) of Indian entrepreneurs view corruption as getting “much worse”, with an additional 28 per cent stating it is getting “somewhat” worse.

HOW WOULD YOU SAY THE LEVEL OF CORRUPTION HAS CHANGED OVER THE LAST FEW YEARS?

2011 TOTAL % 2010 TOTAL %

It is getting much worse (i.e. it is more of a problem) 52 47

It is getting somewhat worse 28 28

It is about the same 11 17

It is getting somewhat better 8 7

It is getting much better (i.e. it is less of a problem) 1 1

Cleaning up corruption is cited among Indian entrepreneurs as the most important factor for ensuring India’s future economic growth – 30 per cent cited this as the most important factor.

Despite the importance entrepreneurs place upon cleaning up corruption, non-entrepreneurs or senior managers clearly view it as even more urgent, with 40 per cent citing it as the most important factor in future growth. Entrepreneurs are almost equally concerned with the government becoming more business friendly (27 per cent) as they are with corruption, whereas only 16 per cent of non-entrepreneurs and senior managers see business reforms as the priority.

When asked to describe in their own words the types of problems that entrepreneurs think are caused by corruption, there was a wide range of responses. The frequently cited problems included “having to pay bribes to obtain licenses” and “delayed and uncertain (business) progress”, although as many as 10 per cent of respondents said no problems arose from corruption.

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THE 2011 LEGATUM INSTITUTE SURVEY OF ENTREPRENEURS: INDIA Page 15

Bangalore Chennai Delhi HyderabadYes 53 Yes 57 Yes 64 Yes 60No 33 No 34 No 24 No 27Don't know 1 Don't know 4 Don't know 4 Don't know 6I would rather not say 13 I would rather not say 5 I would rather not say 8 I would rather not say 7

Kolkata Mumbai All Entrepreneurs Yes 46 Yes 51 Yes 55 No 43 No 39 No 32 Don't know 0 Don't know 2 Don't know 4 I would rather not say 11 I would rather not say 9 I would rather not say 9

Bangalore Chennai Delhi

Hyderabad Kolkata Mumbai

All Entrepreneurs

53%33%

13%1%

57%34%

5%4%

64%24%

8%4%

60%27%

7%6%

46%43%

11%

51%39%

9%2%

55%32%

9%4%

Yes

No

Don’t know

Would rather not say

The number of entrepreneurs who say they have been pressured to pay a bribe has also risen sharply to 55 per cent (up from 44 per cent in 2010). Further, nine per cent of Indian entrepreneurs stated they would “rather not say” if they have been pressured to pay a bribe, suggesting that the actual number is higher than reported. Almost two-thirds of respondents living in Delhi reported paying a bribe, the highest proportion of any of the six largest cities, while less than a quarter say they have not been pressured to pay a bribe in the capital.

Jugaad – the Hindi word meaning ingenuity and the ability to improvise to get around, or to deal with, prohibitive rules and institutions – remains important to Indian entrepreneurs with 48 per cent stating it is “very” important and 38 per cent stating it is “somewhat” important.

Jugaad is most important among businesses that are earning the most revenue and growing at the fastest rate. For example, for those companies that grew more than 50% in the last year, Jugaad was considered “very important” by 72 per cent of respondents.

When looking at Jugaad across genders, there is an interesting difference: 57 per cent of women find Jugaad “very important”, whereas only 43 per cent of men said it was “very important”.

All Entrepreneurs

55%32%

9%4%

Has your own company ever been pressured to pay a bribe?

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FINANCE AND THE ECONOMY

Although still recovering from the negative

effects of the global economic crisis, Indian

entrepreneurs state that access to finance has

become easier in the past 12 months.

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Getting access to finance over the last 12 months Easier: 68 per cent of entrepreneurs25 per cent “much easier”3 per cent “much harder” 15 per cent “somewhat harder”FINANCE AND THE ECONOMY

The economic crisis has had an overall negative impact on the willingness of Indian’s to start their own business according to 58 per cent of Indian entrepreneurs, indeed 17 per cent say this has been a “large” negative impact. Interestingly, 27 per cent of entrepreneurs believe that the financial crisis has had a positive impact on individuals to start and run their own business.

Gaining access to finance has become easier over the last 12 months according to 68 per cent of entrepreneurs, with 25 per cent saying it has become “much easier”. Only three per cent say it has become “much harder” and 15 per cent say it has become “somewhat harder”.

Has access to finance become easier or more difficult over the last 12 months?

Much easier 25%

Somewhat easier 43%

Neithereasiernormoredifficult14%

Somewhat harder 15%

Much harder 3%

Indian entrepreneurs state that gaining access to finance is the most important factor needed for success, when listing their top three priorities. Accessible finance tops the list with 51 per cent followed by the ability to take risks (45 per cent) and possessing creativity and invention (43 per cent).

When asked for the main source of finance used to start their business, most Indian entrepreneurs cited a bank loan (38 per cent), followed by personal savings (31 per cent) or a personal loan from a family member (17 per cent).

Of those who used a bank loan, 69 per cent used a state run bank while 31 per cent received their loan from a private bank.

25%

43%

14%

15%3%

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Banking and financial services 45Consumer products 24Manufacturing 19Agriculture 11Communication and IT 46Sciences 8Technology (products and services) 27Educational services 18Defence products 2Transportation and Infrastructure 11Environmental products and services 5Legal services 3Healthcare products and services 14Real Estate 19Professional Services 5Media/Entertainment 10Construction 5Hospitality 6Retail 6

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When asked which three sectors of the Indian economy offer the greatest prospect of growth right now, Indian entrepreneurs listed as their top three: communication and IT (46 per cent); banking and financial services (45 per cent); and technology (27 per cent).

Which three sectors of the Indian economy present the greatest growth opportunity right now? (Please tick up to 3 options)

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GOVERNMENT

Overall, Indian entrepreneurs are positive about

their government’s performance in making India a

business-friendly place although data reveals that

government can do more to encourage an increase

in entrepreneurial activity.

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GOVERNMENT

Overall, Indian entrepreneurs are more positive than negative about the Indian government’s current performance. When asked if the government is currently doing a good or a bad job, more respondents selected “very good” and “fairly good” than selected “very bad” and “fairly bad”. However, this is hardly a ringing endorsement of the current government particularly when you consider that a quarter of respondents selected “neither good nor bad”, which suggests a high degree of lethargy among entrepreneurs about the government’s performance.

DO YOU THINK THE INDIAN GOVERNMENT IS CURRENTLY DOING A GOOD OR BAD JOB?

ENTREPRENEURS %

Very good job 17

Fairly good job 32

Neither good nor bad job 24

Fairly bad job 15

Very bad job 13

Generally, younger Indians are showing higher levels of discontent with their government’s performance than citizens aged 35 and above.

When asked to name the most important factor for India’s future economic growth, the top responses all have direct implications for government: cleaning up corruption was cited as the most important by 30 per cent of Indian entrepreneurs; government becoming more business friendly was next with 27 per cent; while one in four believe a better-equipped workforce from an improved education system is the priority.

A strong majority (60 per cent) of under 35 year olds do not think the government is doing a good job. Yet, exactly half of over 35 year olds believe the current Indian government is doing either a “fairly good” or “very good” job.

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How would you rate the present Indian government’s performance in making India a business-friendly country? And how would you rate your present state government’s performance in making your state a business-friendly place?Very good 22 28Fairly good 45 36Neither bad nor good 19 22Fairly bad 9 9Very bad 5 6Don’t know 0 0

0 10 20 30 40 50

present state government's performance

present Indian government's performance

Very bad

Fairly bad

Neither bad nor good

Fairly good

Very good

percentage %

Indian government

State government

When asked more specifically about the government’s performance in making India a business-friendly country, Indian entrepreneurs are more positive. A total of 67 per cent believe the government is doing a good job, indeed 22 per cent say is it doing a “very good” job. Only 14 per cent said the government was doing a “bad job”, while 19 per cent said its performance was “neither good nor bad”.

There is a high level of positivity for state governments’ performance on this metric. A total of 63 per cent believe their state government is doing a good job, and 28 per cent say it is doing a “very good” job.

How would you rate the present government’s performance in making India a business-friendly country?

With regards to the perception of whether the respondents’ state is a good place for entrepreneurs to succeed, the situation looks more positive. Three-quarters think their state is a good place for entrepreneurs to succeed, with 31 per cent of those saying it is a “very good” place. Only four per cent think their state is a “very bad” place for this.

Delhi scores highest (of the six largest cities) in this regard as 38 per cent think the capital is a “very good” state in which to succeed, while just a quarter of respondents in Bangalore rate their state (Karnataka) as a “very good” place for entrepreneurs to succeed.

When it comes to understanding which factors provide most assistance when starting-up as an entrepreneur, the Indian government performs poorly. For example, when asked to name the most helpful factor in becoming an entrepreneur, only four per cent cited pro-business actions by the government.

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Page 22

ENTREPRENEURIAL ENVIRONMENT

In general Indian entrepreneurs believe that India is

a good place to be successful and indeed businesses

have experienced an increase in growth over the

past 12 months.

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THE 2011 LEGATUM INSTITUTE SURVEY OF ENTREPRENEURS: INDIA Page 23

ENTREPRENEURIAL ENVIRONMENT

When asked to assess the value the wider public places on the contribution entrepreneurs make to the economy, Indian entrepreneurs are very positive: a total of 85 per cent believe that the public value the contribution they make, indeed 47 per cent believe the public place “a lot” of value on their contribution to the economy.

As previously mentioned, entrepreneurs perceive that India is a good place for entrepreneurs to succeed. When asked whether India overall is a good or bad place for entrepreneurs to succeed, 84 per cent state that they think it is a good place, with 33 per cent of those stating it is a “very good” place.

When asked to state the growth rate of their business over the last year, only eight per cent reported growth of “less than 5%”. A high 35 per cent of entrepreneurs experienced annual growth “between 5%-10%”, closely followed by 31 per cent of entrepreneurs who experienced “between 10% - 15%” growth. Only eight per cent of entrepreneurs experienced annual growth upwards of 25%.

When compared with 2010 data, some differences emerge. The most obvious difference (see table) is that the median growth rate for Indian businesses has increased. This means that in 2011 more businesses have moved out of the lowest bracket of growth, and now occupy the slightly higher brackets of growth.

AND WHAT WAS THE GROWTH RATE OF YOUR COMPANY OVER THE PAST YEAR?

2011 ENTREPRENEURS

%

2010 ENTREPRENEURS

%

500 EMPLOYEES

OR MORE

1-49 EMPLOYEES

Less than 5% 8 18 0 7

Between 5% and 10% 35 36 18 39

Between 10% and 15% 31 20 33 31

Between 15% and 25% 17 12 22 15

Between 25% and 50% 6 6 15 5

More than 50% 2 4 11 1

Don’t know 1 5 1 1

When you look at the growth data in terms of business size, it becomes clear that big companies are growing faster than small companies. Nearly half (48 per cent) of all companies with 500 employees or more grew at a rate of 15% or more in the last year, with 26 per cent of those companies growing at more than 25% growth in the last year. Whereas, only six per cent of companies with 1-49 employees grew at a rate of 25% or higher.

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Page 24

SAMPLEThis survey is part of a series published by the Legatum Institute, in conjunction with YouGov – the world’s leading online polling research firm. The results were gathered in June 2011 from a panel of entrepreneurs, senior managers, and aspiring entrepreneurs from across India. The total number of respondents who completed the survey was 2,012, of which 50 per cent were classed as entrepreneurs*, 40 per cent as aspiring entrepreneurs**, and the remaining 10 per cent identified themselves as senior managers*.

Of the total respondents, 78 per cent were male, 68 per cent were in the 18-34 age bracket, 85 per cent were still in education at the age of 20, 81 per cent identified themselves as belonging to the Hindu religion (only one per cent say they do not belong to a religion), and 60 per cent answered the survey from home (33 per cent from work).

The reason for running a panel survey is to enable year-on-year comparisons and to track changes over time. Where interesting changes have occurred since last year, they have been highlighted in this report. For certain questions, comparison is not possible because the question has been modified over the past year in order to improve the quality and clarity of the data collected.

Entrepreneus are categorised by answering Option (a) to the following question and Senior Managers by answering Option (b): * Entrepreneurs and senior managers are categorised by their answer to the following

question: Which of the following applies to you?

(a) I run my own business (b) I am employed as a senior manager

** Aspiring Entrepreneurs are those who answered with option (a) to the following question:

And which of the following best applies to you? (a) I am the type of person who would like to start their own business (b) I am the type of person who would prefer to be employed by an existing business

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THE 2011 LEGATUM INSTITUTE SURVEY OF ENTREPRENEURS: INDIA Page 25

2011 201069% believe India is heading in the right direction 64% believe India is heading in the right direction

56% believe that India will become the most important global power in 20 years

50% believe that India will become the most important global power in 20 years

Sector perceived as having the highest growth potential: Communication and IT (46%)

Sector perceived as having the highest growth potential: Banking and Financial (49%)

67% think that the government is doing a good job in making India business friendly

63% think that the government is doing a good job in making India business friendly

29% consult a family member or friend when making an important business decision

42% consult a family member or friend when making an important business decision

55% of entrepreneurs have been pressured to pay a bribe 44% of entrepreneurs have been pressured to pay a bribe

60% of entrepreneurs believe people can be trusted 54% of entrepreneurs believe people can be trusted

78% think that people in India can get ahead financially by working hard

74% think that people in India can get ahead financially by working hard

49% believe India is “much" more welcoming of entrepreneurs than 10 years ago

49% believe India is “much" more welcoming of entrepreneurs than 10 years ago

65% cite corruption as a serious problem for business 63% cite corruption as a serious problem for business

Entrepreneurs with 500+ employees who say “Jugaad” is very important: 48%

Entrepreneurs with 500+ employees who say “Jugaad” is very important: 61%

31% think their local/regional governments need to reduce the time and costs associated with enforcing contracts

17% think their local/regional governments need to reduce the time and costs associated with enforcing contracts

80% believe that corruption has got worse over the last few years

74% believe that corruption has got worse of over the last few years

51% think access to finance is the most important factor in helping an entrepreneur succeed

43% think access to finance is the most important factor in helping an entrepreneur succeed

30% think cleaning up corruption is an important factor for India's future economic growth

30% think cleaning up corruption is an important factor for India's future economic growth

47% believe the Indian public place a lot of value on entrepreneurship

35% believe the Indian public place a lot of value on entrepreneurship

17% cite family as their initial source of start-up capital 39% cite family as their initial source of start-up capital

65% indicate that the social impact is the main motivation of their work

61% indicate that the social impact is the main motivation of their work

8% think school/university is where others gain their desire to become entrepreneurs

6% think school/university is where others gain their desire to become entrepreneurs

75% think their state is a good place for entrepreneurs to succeed

71% think their state is a good place for entrepreneurs to succeed

86% believe India will be in a stronger economic position in five years time

84% believe India will be in a stronger economic position in five years time

This table tracks some key differences and similarities between the findings from our 2011 survey and the findings from our 2010 survey:

DATA COMPARISON 2010 VS. 2011

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