assignment of entrepreneur.docx

8/14/2019 assignment of entrepreneur.docx

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University Of Allahabad Page 1

A

ASSIGNMENT

ON

EMERGENCE OF ENTREPRENEURIAL

CLASS IN INDIA

SUBMITTED BY

Ambuj Kumar TiwariMBA Final Year

Session 2009-2011

SUBMITTED TO

PROF. RAMENDU ROY

MOTILAL NEHRU INSTITUTE OF RESEARCH

AND BUSINESS ADMINISTRATION

UNIVERSITY OF ALLAHABAD, ALLAHABAD-211001


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Emergence of entrepreneurial class

Emergence of entrepreneurial class is as old as our ancient history itself. its

dates backs to the pre-Vedic period when Harappan culture flourished in India .

However , history of entrepreneurship and emergence of entrepreneurial class in

India may be viewed under the following periods.

Period 1. Entrepreneurship in Ancient period

Period 2. Entrepreneurship in pre-Independence era. i.e. before 1850.

Period 3. Entrepreneurship between 1850-1947.

Period 4. Entrepreneurship in 1947 and onwards post-independence period.


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Period 1: Entrepreneurship in Ancient period

The first phase of entrepreneurship emerged when the Aryan conquers

settled down in this country by suppressing the non-aryans. They appropriated the

village communities to themselves leaving a little for the villagers and natives. Thus

, the main conflicts, breeding of cattle and cultivating land . All these occupations

did not exist at the time of conquest by Aryans. They were the product of

entrepreneurial actions. Commenting on the earlier phase of entrepreneurial

evolution Walter Ruben observes:

The problem was to evolve some kind of law and order to regulate this

division of products. The question was: Who had to till the field, breed the cattle

and to work in handicrafts and what part of the product would be given to the

various social classes?

Immediately after the conquest, the settlement of the Aryans began and

together with it the formation of states and the establishment of the laws. The

need of Dharma was expressed in the oldest upnishads and the oldest Dharmasutras followed. They avoided the speaking of class struggle as mentioned above ,

but used the terminology of the four ranks(Varnadharma), which is quite

characteristics of despotism. In the same period, science began in India especially

medicine and astronomy.

Ancient literature like Manusmriti has provided a clear idea about entrepreneurial

class of people during ancient period (pre- vedic). According to Manusmriti, people

belonging to Vaisya caste were regarded as entrepreneurs who are specialized to

maintain live stock, to give charity , perform sacrifices, study scriptures, undertake

business and banking .

Hence , Vaisya are specialized class of people carrying entrepreneurial activities in

these days. They carried on trade in agriculture, industry and banking sectors.

Agriculture, crafts and handicrafts were the basic sources of the occupational

development during this period comprised ownership of land pasture grounds,

trees, forests, water reservoirs, mines, etc. There is clear evidence about the use of


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technical knowledge in water use namely, Persian water (Arahatta) in Northern

India during the early medieval period. With introduction of entrepreneurship, the

towns and cities developed.

Period 2. Entrepreneurship in pre-Independence Era. before

1850 A.D.

During pre-Independence era, agriculture was the mainstay of the people of

India. It is said that besides agriculture, a class of businessmen specialized in

manufacturing of handicrafts, metalworks, stonecarving and jewellery designing

,etc. Had dominated the industrial entrepreneurship sector in rural areas. Those

communities were known as Banias(Hindu and Jain), Parsis, Chheriars and

Gujaratis, etc. These communities actually laid the foundation of entrepreneurship

by carrying on trade and commerce at initial stage and later they started

establishing manufacturing centres. These centres were located either near riverbanks or near ports for ease of transportation. The following types of industries

were found in those period.

I. Cottage industries manufacturing woodcraft items, jewellery designing,stonecarving, ironworks, hornworks, etc.

II. Village industries comprising handloom and textile production, brass andmetalworks developed in clusters.

Indian handicrafts, which were once considered the best in the world , had

received a severe blow due to the British colonialism . Industrial revolution in great

Britain had reduced in india to the status of materials supplier and a consumer

market for the finished products manufactured in Britain.

Manufacturing entrepreneurship in India did not develop till 1840. The

introduction of railways in 1840 led to the beginning of industrial entrepreneurship

through factory system.In India in 1854, the first and foremost textile mill was


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established. Before this, in 1847. R. Chotulal, a nagar Brahmin envisaged to

manufacture textile on the basis of modern factory system.

From the very beginning, the Britishers devised a discriminatory economic

policy for the Indian entrepreneurs, as a consequence of which industrial

entrepreneurship suffered a great deal. The following reasons are attributed to

the slow growth of entrepreneurship in India during this period:

I. The enterprises were not given proper protection by the BritishGovernment.

II. Only those industries in which the British Government put their own capitalwere given encouragement.

III. The railway freight charges were higher for locations not nearer to the ports.This proved that the transportation of goods manufactured for the Indian

markets was more expensive than goods meant for export.

IV. The British imposed exorbitant tariffs on India-made goods.V. Entrepreneurs were constantly harassed for getting licences and finance to

establish and run industries.

VI. There were almost no facilities for technical education which alone couldstrengthen Indian industrial entrepreneurship.

VII. The Indian indigenous entrepreneurs faced fierce competition frommachine-made goods exported to India.

VIII. Lack of transportation and communication facilities acted as the stumblingblock in the way of industrial growth.


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IX. The British Government did not encourage the establishment of heavyindustries like heavy machinery, iron and steel which are necessary for rapid

industrialization.

X. Political turmoil and abolition of princely courts discouraged the growth ofentrepreneurship.

XI. Prevalence of multi-currency system affected the business environment andblocked the growth of enterprise.

Inspite of the above problems , the exports trade of textile in 17th

century

was on ascending trend . During this period, grouping of Indian merchants into

joint-stock associations for the purpose of managing the supply of textiles to the

European companies was very significant. This helped in exporting huge volume of

textiles to the European markets leading to favourable terms of trade. But in

subsequent years, the demand for the Indian textiles decreased due to

discriminatory custom policies adopted by the British Government. Till 1850,

growth of entrepreneurship means only growth of british private enterprises like

plantation, coal mines, banking and insurance.


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Period 3. Entrepreneurship between 1850-1947

The mid-nineteenth century opened up the path for rapid industrialization. With

the introduction of railways in 1853 in the country, the scope of industrial

entrepreneurship had gone up. Britishers started harnessing the natural resources

of India to their own advantage simultancously developing roads, railways ports

and other infrastructural facilities. In course of time , Britishers along with

mercantile class of India have built a conducive atmosphere for investment of

trading as well as manufacturing activity.

However, during 1850- 1947, entrepreneurship in India can be analysed in the

following manners:

I. Entrepreneurship in eastern part of the countryII. Entrepreneurship in western part the country

In eastern part of India , the entrepreneurship was mainly European who

engaged in export-oriented industries like jute, textiles, tea, coal,etc. But the

entrepreneurship in western part of India was mostly among the Indians. It is , of

course, due to its relatively longer political independence and the advantages

availed by all the communities of western india. British exploitation was not

directly imposed . When East India Company started its political and commercial

activities , Indian merchants were not eliminated from the field of finance and

trade.

Entrepreneurship was in abundance in Indian business, but it could not offer

sufficient scope for its exercise. However, Indian history indicates that Indian

traders had trade relations with Greece Yemen and other Arabian and African

countries.


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Emergence of parsis as Entrepreneurs

In India ,an emergence of manufacturing entrepreneurship is viewed by some

social scientist as the consequence of arrival of East India Company followed by

colonial British rule . It gave new stimulus to businessman by injecting various

changes in economy and accelerating the export of raw materials and import of

finished goods. However, the parsis were greatly influenced by the East India

Company.

During this period, Parsis established a good rapport with East India Company.

They acted as brokers, suppliers of commodities and craftsmen in ship-building

industry. Parsis built vessels for the company . In 1852, a Parsi foreman of a gun

factory belonging to the company established a steel industry in Bombay. All the

above examples prove that the starting point of manufacturing entrepreneurship

laid with emerging entrepreneurial talents among the parsis in the country. On the

strength of the historical evidences produced by Brimmer , Lamb ,Gadgil and

Tripathy, the illustrious historians, it could be observed that Parsis, along with

Marwaris and Gujratis trading castes, took to entrepreneurial behaviour in the last

decades of the 18th

century in Calcutta ,Bombay and Madras.Britishers and Parsisobserved the impact of industrial revolution in Britain and thus they started

exploiting Indian natural resources and promoted indigo plantation, leather

manufacturing and steelmaking.

Swadeshi Movement and Birth of Indigenous Entrepreneurship

In 1905, Indian leader adopted concept of Swadeshi and boycott to

counteract the discriminatory policy of the British Government. The swadeshi

method was based on atmashakti (the principle of self-reliance) which meant

manufacturing and using indigenous goods by the Indians. The basic objectives of

the Swadeshi movement were the following :

a. To promote indigenous industries by the Indian entrepreneursb. To rejuvenate the cottage and handicraft sectorc. To provide employment opportunities to the craftsmen of india


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d. To open up a vast captive market for sale of product manufacturedindigenously

The movement acted as an antidote to the British policy and encouraged the

Indians to plunge into entrepreneurship. Jamshedji Tata established his first iron

and steel industry with the help of Swadeshi contribution. P.C.Roy founded the

Bengal Chemical Works. V.O. Chidambaram Pillai set up the indigenous Steam

Navigation Company at Tuticorin, Tamil Nadu. Hence , due to this movementindigenous entrepreneurship developed in many types of activities such as textile

s, soap, matches, oil, tanneries, potteries, etc. Even banks and insurance

companies grew up through swadeshi endeavour. During this period, the

Europeans took active efforts particularly in plantations and jute.

Indian entrepreneurs were given the opportunities to produce more during

the First World War because of the following two reasons.

I. Increase in demand for India-made goodsII. Reduction of import of goods from Britain

Managing Agency system

In the post- war period, the policy of protection by the government provided

stimulant to certain industrial activities. A remarkable feature of the post-war

period was the introduction of managing agency system. This system was initiate by

Sri Dwarkanath Tagore who glorified the formation of joint stock companies and

emphasized that the management of enterprise must be retained in the hands ofthe FIRM rather than in the hands of any individual.

According to BRIMMERThe persons of INDIAN business communities

(INDIAN business agency houses) were the real entrepreneurs. They introduced new

methods of production, new sources of raw material, new products and new

markets.


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During this period, though the Indian entrepreneurs grew in numbers and

made great headway in cotton textiles and steels. They still faced a numbers of

problems such as:

a. Shortage of technical manpower due to lack of technical and vocationaleducation

b. Lack of managerial skillsc. Lack of technical know-howd. Low level of confidence in accomplishing the jobs

In view of the above-mentioned problems, the Tatas were forced to employ foreigntechnician and managers. However, industries such as cement, sugar, cotton textile,

paper, coal, iron and steel were developed after Second World War. As such,

indigenous entrepreneurship grew at a rapid pace with the emergence of

entrepreneur classes such as Parsis, Marwaris, and Gujratis in the country on the

eve of independence of INDIA.


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Period 3: Entrepreneurship In 1947 And Onwards-Post

Independence Period

In Post-independence Period, the government of India identifies the need for

rapid industrialization. According to V.R. Gaikward and R.N Tripathi, socio economic

background of the persons plays a decisive role in the process of entrepreneurship.

Thomas Timberg has traced the growth of entrepreneurship in the context of lading

business community of Marwaris. During post-independence period, Marwaris

emerged as big investors and industrialists from the status of

Petty shopkeepers and moneylenders. India adopted the mixed economic systemwhere both private and public sector enterprises play crucial role. In free India, the

government itself emerged as a strong force to take up entrepreneurial ventures by

establishing new occupation and industries.

The first industrial policy resolution (IPR) was announced in 1948 which provided

clear-cut guidelines for industrial and entrepreneurial development.

Emergence of Marwaris As A Great Business Class

Marwaris has developed a lot in building new and small enterprises in the

beginning of post-independence era. It is believed that 60 % of assets of Indian

industries were in the hands of marwaris. The monopolies Inquiry commission listed

147 large industries of marwaris in almost all areas which proved their

entrepreneurial talent. Thus , Marwaris made a successful bid to fill the vaccum left

by the British in the business sector.

After independence, the BIRLA group set up the RAYON mill at GWALIOR which hadbeen the largest mill of its kind till 1964. In 1964, the Bajaj group laid the foundation

of hind lamps and in 1949 Dalmia group established cement factory in Orissa. Before

independence, the marwaris controlled only 6 companies: but after independence

they had 618 directorships which rose to one-forth of the total in 1951. The report of

the monopolies inquiry commission, 1964 has mentioned 37 large industrial houses

from which the traditional strength of different communities can be revealed (see

table ).


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The Marwaris controlled only 6 companies; but after Independence, they had

618 directorships which rose to onefourth of the total in 1951. The report of the

Monopolies Inquiry Commission,1964 has mentioned 37 large industrial houses

from which the traditional strength of different communities can be revealed.

Community of leading Industrialists

Community No. Of firms Assets in billions (Rs)

Marwaris 10 7.5

Gujaratis (Hindu) 13 3.8

Bengalis 2 1.5

Parsis 2 4.7

Others 10 2.1

Total 37 19.6

Source: Monopolies Inquiry Commission Report, 1964

Table reveals the frequency distribution of industrial companies controlled

and also the directorship held by communities from 1911-1951.

This Marwaris community emerged as a gaint entrepreneurial class in the

post-Independence period. The houses of Birla, Singhnia , Bajaj and others have

created their image in the international market in the field of industrial

development in India.


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Communities and the Companies

Communities No. Of Companies controlled No. of directorship held1911 1931 1951 1911 1931 1951

British 202 416 382 652 1335 865

Parsis 15 25 18 96 261 142

Gujaratis 3 11 17 71 166 232

Jews 5 9 4 17 13 -

Muslims - 10 3 24 70 66

Bengalis 8 5 20 48 170 320

Marwaris - 6 96 6 146 618

Mixedf control 28 28 79 102 121 372

Total 261 510 619 1016 2282 2622

Source: Adopted from M.M. Mehta, Structure of Indian Industries.

The Industrial policy Resolution of 1956 emphasized on the need for rapidindustrialization through the establishment of heavy industries and expansion of

public sector and co-operative enterprises. This had given rise to a complete

metamorphosis of socio-economic and industrial environment in the country.

Besides the mercantile class, several new communities slowly entered into the

entrepreneurial activity and widened the entrepreneurial and industrial base of the

country.

In postIndependence period, entrepreneurship has been dispersed both

socially and geographically. This has been possible because of infrastructural

development , foreign collaboration, technical know-how , expansion of vocational

and technical education, export promotion, import substitution and above all, the

favourable policy of the Government towards industrial development. The

Government by providing incentives, subsidies and other inputs at concessional

rates induced the entrepreneurs to set up small scale units. Hence , entrepreneurial

growth under planned economic development of the country has reached a new

height. With the induction of educated youths in industry, the composition of

entrepreneurial class changed significantly.


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Emergence of new entrepreneurial class and growth of entrepreneurs can be

attributed to the following aspects:

a. Establishment of institutional support system such as promotionalagencies and financial support agencies

b. Panchayati Raj institutions for village developmentc. Nationalization of commercial banks in1969 for the purpose of nationbuilding

d. Development of money market and capital markete. Formation of specialized institutions like NSIC, KVIB, KVIC, SISI,TCOs,SFCs, etc.

f. Establishment of entrepreneurial development institutions at bothnational and state levels such as NISIBUD, NISIET, EDII and IEDs and CEDs

respectively.


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Thus, a large number of people belonging to the middle or lower middle

classes were encourage to set uo their own industrial ventures due to the above-

mentioned measures adopted by the government for promotion of enterprises.This

has given a new dimension to entrepreneurial growth. The development schemes ,

adopted by the government , were aimed at the following objectives to promote

new entrepreneurs:

i. To encourage a proper distribution of economic power between publicand private sectors

ii. To increase the tempo of industrialization by spreadingentrepreneurship from the existing industrial centres to other cities, towns

and villages

iii. To spread entrepreneurship from a new entrepreneurs to a largenumber of industrially potential people of varied strata.

As such, in post-Independence period, the base and magnitude of

entrepreneurship in India developed manifold. Entrepreneurs recognized the

business not only as a money-spinning activity but also a medium to acquire social

status. The family entrepreneurship units such as Tata , Birlas, mafatlals, Dalmias,

Kirloskars, Desais, Somanis, Ambanis,Kotharis established new frontiers and

expanded the existing units.

Documents

assignment of entrepreneur.docx