In the license-permit-quota era of yore, entrepreneurship in India involved lobbying hard to get exclusive licenses to manufacture items that have a ready demand – whether in businesses involving natural resources like mining, land etc. or consumer products like cars, scooters, motor cycles, white goods, watches, telephone instruments etc. Most of the traditional entrepreneurial families managed to corner such licenses and actively prevented competition by lobbying against giving out more licenses. Others turned lobbying into a fine art by getting government rules changed to suit them. Since capital was scarce, gold-plating projects and getting them financed with long-term debt to generate the required funds for the promoter to put in his capital contribution and more, was the order of the day. This is anything but novel as being suggested through messages in the WhatsApp university currently. If truth be told, there are hardly any entrepreneurs of yester years who have not indulged in this sport because that was the accepted socio-political milieu during those days where a warped version of a socialist utopia was being thrust on unsuspecting citizens.
Successful entrepreneurship in India, even today, is a veritable obstacle race that involves herculean efforts in dealing with the myriad governmental agencies to get approvals from all and sundry and procuring debt finance while putting one’s own capital at risk. While the state of affairs has improved a lot of late, the long-gestation capital-intensive greenfield projects are still some of the toughest to implement. Meaningful projects that can make a difference to the existing capacity in the country, whether in the conventional sectors like power, ports or transportation or in the emerging sectors like green power, EVs, data centres, semiconductor manufacture etc, require several billion dollars of investment. Unless one expects the Government to promote companies in these sectors, we need an army of entrepreneurs who can take the risk of putting up mega projects with their own capital supplemented by outside debt and equity. With the gradual transformation/closure of long term lending institutions over the least three decades in India and commercial banks typically undertaking their business at the short-term end of the lending spectrum given the nature of their liabilities, access to long term debt finance has become almost non-existent. IDFC was started with a lot of fanfare and it ended up becoming a Bank. ICICI and IDBI have become banks and IFCI is barely surviving in the new milieu with the once-venerable IRBI closing down. The Government seems to be alive to this lacuna in our financial system and has been trying to make long term debt capital available through new institutions but the demand far outstrips supply. Another form of long term debt capital for greenfield projects can be through listed NCDs, a market for which too is virtually non-existent in India. Let’s now turn towards equities. If truth be told, there are less than a couple of dozen successful entrepreneurs / business families in India who have the capacity to take up mega projects and risk their capital on such ventures. Out of these, the new breed of entrepreneurs who are the children of economic reforms of the nineties – largely in the IT, telecom, real estate and construction sectors – do not seem to be having the fire in the belly to diversify into the large opportunities in the core sector of infrastructure creation. Among the others, a majority of them are loath to diversifying into new sectors and seem to be happy sticking to the sectors where they have been successful. In fact, there are very few serious bids when some of these mega projects are put through the tendering process.
As a consequence of our failed tryst with utopian socialism, the common refrain amongst us is that if an entrepreneur has become successful he or she must have certainly cut corners and profited from such acts. It is easy for us, arm-chair critics, to pontificate over the leftist narrative vilifying their class enemies through their “scholarly” writings on the ills of capitalism and the successful companies built by entrepreneurs. The last three decades have put paid to such thoughts globally but there are some remnants of such shop-soiled theories still subscribed to by some leftists and their sympathisers in this country. The public sector has largely vacated significant portions of the factors of production after unsuccessfully trying to efficiently produce goods and services for the last several decades and Governments the world over, play an important role in encouraging the private sector to produce goods and services, while ensuring proper regulation of such activities.
As Adam Smith, the father of modern economics, once said “It is not from the benevolence of the butcher, brewer or the baker that we expect our dinner, but from their regard to their own interest”. Though all entrepreneurs start their ventures to further their own interest in earning profits, by so doing, the successful ones not only satisfy the demand for goods and services but also create employment and develop the areas around their factories, besides contributing to the exchequer through taxes. It is important to highlight that most of these entrepreneurs have enough wealth to lead a happy life like the arm-chair critics that we have in plenty. Instead of choosing this easy path, the entrepreneurs put their wealth at risk and meet the needs of the nation by implementing projects that produce goods and services for us citizens.
The Adani episode has to be seen in this light because here is a first generation entrepreneur who has created wealth by taking up the difficult-to-implement and long-gestation core sector projects in the economy while all the well-endowed business families were busy capturing the easier opportunities that were available in a growing India. It is nobody’s argument that wrong-doing should be overlooked and in fact, should invariably lead to consequences as per the due process of law, but painting everyone in the same broad brush of dishonesty and skulduggery is malicious and this has become a national pastime for the ill-informed arm-chair philosophers who have, most often, not contributed anything worthwhile to society in their whole lives. Despite some haughty fund managers inappropriately claiming to create wealth, entrepreneurs are the real wealth creators in an economy because they are the ones who create employment, pay taxes and develop the areas around which they operate, while allowing investors like us to partake in this process of wealth creation. Not all of them succeed and hence we need to learn to nurture and indeed celebrate entrepreneurship for the risks that entrepreneurs take because the benefits of successful entrepreneurship spread themselves over the whole community and indeed the nation. Decrying them as cheats, tax-evaders, blood-suckers and exploiters as the left is wont to do, is a shame and demotivates budding entrepreneurs. It is time that we as a society learn to respect entrepreneurs for their unsung efforts at wealth creation with several collateral benefits to the nation and celebrate the spirit of entrepreneurship that is alive and kicking in our country.
This article is authored by UR Bhat, Co-Founder at Alphaniti (www.alphaniti.com)
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