INDIAN DIVERSITY AND ENTREPRENEURIAL

DEVELOPMENT

Economic contribution of diversified society of India

Indian Diversity and Entrepreneurial Development

By Dr Babar Ali Khan

Integral University, Lucknow, India

Dividend of Diversity

Entrepreneurship is one of the most important drives for economic and social development. It is

a valuable source of innovation that plays a significant role in job creation and combating

unemployment. Knowing the benefits of entrepreneurship for economy many governments tried

to create conditions favourable to entrepreneurial activities.

Diversity could be a great strength in today's world – it breeds innovation and entrepreneurship.

Empirical results provide strong evidence that local diversity is positively correlated with an

entrepreneurial trial as well as a start-up. Socio-religious diversities work as a catalyst for the

emergence of entrepreneurial culture in the region. Successful organizations leverage the

range of views, experiences, cultures, genders, and age that exists within the organization. There

is a compelling array of statistics that illustrate the business advantages, particularly the financial

benefits, of diversity within boards and senior leadership.

Between 2008 and 2010, McKinsey & Company reviewed the performance of 180 public traded

companies in France, Germany, UK and US with more diverse executive teams to see if they

outperformed their less diverse peers.

The report clearly showed that diversity makes a distinction. The findings were remarkably

consistent. For companies ranking in the top quartile of executive-board diversity, returns on

equity (ROE) were 53% higher on an average than those in the bottom quartile (Thomas Barta,

Markus Kleiner, and Tilo Neumann, Is there a payoff for top-team diversity? McKinsey

Quarterly,(April2012).)

In a survey report conducted by Deloitte in 2012 of 1550 employees in three major Australian

businesses the impact of workforce diversity on organizational performance was established. The

report said: ―When Deloitte modelled the relationship between diversity and inclusion and

business performance, we identified an ‗uplift of 80% when both conditions were high... when

there is high diversity and low inclusion, or low diversity and high inclusion, the business

outcomes are never as impressive as the high diversity and high inclusion combination.‖

Diversity can affect entrepreneurship through two opposite channels. At the firm

or cluster level, heterogeneousness could lead on to improved decision-making and positive

outcomes. For instance, dissimilar groups are likely to have access to non-overlapping

information sets and various skills relevant to a specific task (Lazear 1999). Moreover, exposure

to completely different views will result in creative thinking and innovation (Hong and Page

2001).

Diversity can have similar opposing effects too. Diversity will result in a lot of conflict, less

growth, and less trust, but it can also spur productivity, output and economic development. The

inability of diverse societies to agree on public good provision (Alesina et al. 1999) may be

overcome with the provision of more but equally competent private goods. In addition, diversity

may be more likely to have a positive effect on more advanced societies; as opposed to poor

economies

Soico-Religious diversity and its functions

In recent times, academic studies have revealed a rising interest within relationship between faith

and economic performance. Entrepreneurship is considered the channel by that faith influences

economic activity and therefore the decision to become an entrepreneur (Audretsch, Bonte and

Tamvada 2007). According to Max Weber religion is a key determinant of entrepreneurial

development. He argued that entrepreneurial energies are driven by religious beliefs and causes

and consequences.

Entrepreneurial activity is a vital factor of growth, particularly in the early years of transition,

since small business owners established businesses in industries that did not exist, or were

stagnant, under socialism (Berkowitz and DeJong 2011). In communist society, where religion is

discouraged, small business especially entrepreneurship are not preferred. A society with

religiously diverse localities has more respondents who try to start a business as well as start-ups.

Likewise, sales and employment grow faster in entrepreneurial ventures than in state or

privatized firms, and new businesses are more efficient (McMillan and Woodruff 2002).

Entrepreneurial ventures might also be an efficient means of mitigating income shocks by

providing households with an alternative supply of employment.

Conceptually, diversity may capture the language, ethnic and religious differences, among

others. It is understood that not all types of diversity may affect entrepreneurship in the same

way. Religious identity is arguably less imprecise as compared to ethnicity or language. Even if a

person can be multi-lingual or multi-ethnic, one can rarely be a member of multiple religious

groups.

It is more expected that, in the transition region context, the positive effects of religious diversity

on entrepreneurship are likely to dominate. Despite the salience of religious divisions, the faith-

based conflict has been constrained to several countries only, while in most places peaceful co-

existence has been the norm. Moreover, sturdy financial growth in several transition countries

could have provided supplementary incentives to harness the benefits, rather than costs, of

diversity.

Alternatively, it is also possible that some of the diversity's negative consequences, such as the

higher likelihood of conflict or labor discrimination, provide niche markets for business starters.

For example, individuals excluded from government employment may be more likely to set up

successful businesses, while post-conflict reconstruction may create demand for entrepreneurs'

services.

Social capital has been found to be a key driver of entrepreneurial behavior, as it allows access to

information through social networks (Burt 1992). Entrepreneurs with social capital may be better

equipped to take advantage of the positive effects of diversity. The social capital of a group may

increase with the network density inside the group and as well as with weak ties to outside

groups. A community that is religiously diverse can benefit from both of these compensation. On

the one hand, religious groups are tightly linked within.

Religion's function, according to evolutionary theorists, is to offer a selective advantage at the

group level by promoting supportive behavior within the group (Norenzayan and Shariff 2008).

Religious groups may also give a resource for the generation of entrepreneurial social capital.

Like as Islam encourages business and promotes entrepreneurship values. The Islamic approach

to Entrepreneurship focuses on several values such as honesty, experience, investment to grow

capital, partnership and collaboration with people. These individual values are strongly

correlated to success in business and entrepreneurship.

The voyages that carried Middle Eastern merchants to unexplored foreign lands often resulted in

the opening of new markets (Ashtor 1976, chap. 3; Abu-Lughod 1989, chap. 8; Chaudhuri 1985,

chap. 2). In the Arab heartland of Islam, during the ninth and tenth centuries 75 percent of all

religious scholars (Ulama), whose ranks included all jurists, earned a living mainly from the

business. Some of them visited India, few traveled as far as China on commercial feats.

Cultural Diversity and Entrepreneurship

Cultural diversity is increasing globally. Studies show time and time again that diversity presents

important edges, ranging from new market opportunities to avert a crisis.

A number of recent studies have built a strong case linking cultural diversity with a range of

economic outcomes. Many factors are said to be the driving force in generating economic growth

by diversity. Research in Western Europe and the US have supported the ‗diversity dividend' in

terms of creativity, innovation or productivity (Anderson et al 2005, Niebuhr 2010, Ottaviano

and Peri 2006).

Forbes in an analysis of the stock performance of the 26 publicly traded companies on its ‗2010

Power Women 100 list' that are headed by women, found that, on an average, these companies

outperformed their industries by 15% and the overall market by 28%.

In an assessment of cultural diversity and its impact on entrepreneurship done in England and

Wales (by Andres, Rodriguez-Pose, Daniel Hardly -2014) it was established that cultural

diversity breeds entrepreneurship. But the nature of diversity is critical. It was also observed that

recent migrants, rather than the descendants of past migrants, create the conditions for a more

dynamic entrepreneurial environment. This effect is most clearly substantiated in terms of

knowledge-intensive start-ups.

A growing body of area-level analysis has instructed links between aspects of urban cultural

diversity and economic performance. Diverse teams may be more useful than uniform teams in

problem-solving or generating new ideas—both new products and processes. Specifically,

"cognitively diverse" groups leverage a wider pool of perspectives and skills (Berliant and Fujita

2009; Page 2007).

Delicate nature of culture needs a higher understanding of its relations with the economy. It is

noteworthy that culture influence on economy played vital role in studies of an economist like

Smith who attributed economical success to protestant ethics. Culture can have a higher

influence on the perception of skills than actual entrepreneurial education.

The power of an entrepreneurial culture comes in when there are many stories and examples of

workers who have achieved remarkable things by taking initiative, making decisions

independently and acting like entrepreneurs.

Immigration and Its Benefits

Migrant status has strong associations with proactive entrepreneurial behavior. A number of

studies have explored links between migrant and minority category and entrepreneurial behavior.

Enterprising minority individuals are able to identify new market opportunities and "translate"

between social groups (Bonacich 1973)

Immigration is creating regions distinctly more diverse and has become one of the major policy

issues of the 21st century. In the UK alone, the foreign-born population has expanded by more

than four million in the last two decades (making up more than 15% of the working-age

population). What's more, immigration is more diverse than ever. No longer strictly about

Mexicans in Los Angeles, Turks in Berlin, or Romanians in Milan, immigration debates in cities

and regions now concern more people from more places than ever before.

Diversity shapes the knowledge economy. It does so by expanding the knowledge base and

enhancing a region's ability to recognise, incorporate, and take advantage of this new knowledge.

New immigrants are likely to be especially important to this picture as they bring new ideas and

perspectives to strengthen the fires of innovation – all the more so when they are highly skilled.

Additional factors such as international networks generated through migrant mobility (which

forge knowledge pipelines), skill complementarities between native and migrant workers, and a

higher propensity for risky action among migrants (like start-up creation), reinforces the

economic potential of diverse areas.

According to a recent analysis based on a sample of 20 OECD countries ( Battisti et al. 2014), it

was found that in two-thirds of the countries, both high-skilled and low-skilled natives would

benefit from a small increase in immigration from current levels. The average welfare gains from

immigration are 1.25% and 1.00% for high- and low-skilled natives, respectively.

The analysis shows that immigration into imperfectly competitive labour markets need not be

weakening labour market outcomes for inhabitants. Instead, it can improve the job creation

incentives of firms. Thus, actions to eliminate the immigrant-native wage gap may hurt natives.

This encouraging result is susceptible if immigrants are too often unemployed or if too many of

them are unskilled. Policies reducing the rate of job loss for immigrants would, therefore, help

natives. Also in contrast to prevalent belief, immigrants do not seem to hurt low-skilled natives,

even in the more realistic framework developed here. This is because immigration is often

balanced between more and less educated because its job-creation effect can help.

The marginal productivity of immigrants was found to have a small surplus because immigrants

contribute more to production than they earn as long as they have a different skill distribution

from natives (Borjas 2003). The rise of migrant entrepreneurship, in general, appears to have had

a favourable effect on the economy of any country.

Amalgamation of foreign cultures in India

India has witnessed the waves of invaders and travelers or migrants coming from China, Central,

and West Asia and also from Southeast Asia. These Foreign rulers came to India due to the

turbulent condition in their native countries. They adjusted themselves with Indian culture and

introduced some new elements in the region

In fact, the history of Bharat has a history of waves of invaders and migrants coming and settling

one after another in different parts of the country. The subcontinent faced many invasions and

the invaders, after occupying it, settled here and became its inhabitants. The fact that every

invader or migrant who was attracted by its rich natural resources and economy brought his

culture and integrated it with the indigenous one led to a lot of modifications in society and

augmentation of the economy. They introduce new traditions and values which enrich society as

a whole. All these changes nurtured a strong entrepreneurial culture in India.

Ancient India

North India came under the rule of several foreign people, such as the Yavanas, Kushans, Sakas,

Parthians, etc. They began to settle in north-west India from the first century B.C. onwards.

Three big political powers emerged in India between the 1st century B.C. and 3rd century A.D.,

which played an important stabilising factor over large regions. They were –

a) Satavahanas in the Deccan,

b) Kushanas in the north, and

c) Sakas in the west.

The Yavanas were the first ones to establish foreign supremacy on Indian soil. ‗Menander' were

some important Indo-Greek kings. The Parthians were Iranian people. After Gondophernes, the

Pahlava rule in India ended. They were replaced by the Kushanas. Sakas or Scythians were

nomadic tribes originally from central Asia.

Medieval India

Similarly, when Turks from Central Asia invaded India they introduced their culture in society.

Turks also picked up many things from the Indian culture which resulted in shared values. The

arrival of the Turks in India had a lasting impact on our socio-economical conditions.

The Turks also brought the latest technology of that time to India which brought radical changes

in our economy. For instance, improvement in wheels helped in the irrigation system and

increased agricultural production. They provided new tools to artisans which made them more

productive in their professions. The artisan class basically emerged from the lower castes, so

when they started to earn money, their social status rose.

Furthermore, the invention of paper and production brought radical changes. The Arabs had

learned this technique from the Chinese and it was the Turks who introduced it in India in the

12th century. It helped the bureaucrats in writing down all the detail of administrative rules and

regulations and acting accordingly.

Politically, the Turkish rule ended the small states and laid down the foundation of a kingdom. It

made trade routes safe for traders which resulted in the flourishing of trade and commerce in the

subcontinent.

Alauddin Khilji (1296-1316) also invaded southern India and linked it with the north. Later on,

Muhammad Tughlaq (1325-51), by building his second capital in the south, integrated the two

regions further.

With political stability in place, scholars, poets, and Sufi saints arrived in India in the hope of

getting patronage from the rulers. And they were not disappointed because they received a warm

welcome from the ruling classes.

Indian economy before and after the colonial period

The Indian economy in the Pre-British period consisted of isolated and self-sustaining villages

on the one hand, and towns, which were the seats of administration, pilgrimage, commerce, and

handicrafts, on the other.

The structure and organisation of villages

The village community was based on a simple division of labour. The farmers cultivated the soil

and tended cattle. Similarly, there existed classes of people called weavers, goldsmiths,

carpenters, potters, oil pressers, washermen, cobblers, barber-surgeons, etc. All these

occupations were hereditary and passed by tradition from father to son. These craftsmen were

paid a stipend out of the crops at the harvest time in lieu of the services performed

Sir Charles Metcalfe writes in this connection: "The village communities are little republics

having nearly everything they want within themselves; and almost independent of foreign

relations. They seem to last where nothing lasts. This union of the village communities, each one

forming a separate little state by itself is in a high degree conducive to their happiness, and to the

enjoyment of a great portion of freedom and independence (Discovery of India-1947).

The villages did acknowledge some outside authority, who in turn may be under a Muslim

Nawab or a Hindu king, by paying a portion of the agricultural produce.

Industries and handicrafts in pre-British India

The popular belief that India had never been an industrial country is erroneous. It was true that

agriculture was the popular occupation of her people but the products of Indian industries

enjoyed a worldwide reputation. The muslin of Dacca, the Calicos of Bengal, the Sarees of

Banaras and other cotton fabrics were known to the foreigners. Egyptian mummies dating back

to 2000 B.C. were wrapped in Indian muslin. Similarly, the muslin of Dacca was known to the

Greeks under the name Gangetika.

The chief business spread over the whole country was textile handicrafts. The high artistic skill

of the Indian artisans can be visualized from this account given by T.N. Mukherjee: "A piece of

the muslin 20 yards long and one yard wide could be made to pass through a finger ring and

required six months to manufacture. Besides the muslins, the textile handicrafts included

chintzes of Hyderabad, Chikankari of Lucknow, Dhotis, and Dopattas of Ahmedabad silk,

bordered cloth of Nagpur and Murshidabad. In addition to cotton fabrics, the shawls of Kashmir,

Amritsar, and Ludhiana were very famous. Not only that India was also quite well-known for her

artistic industries like marble-work, stone-carving, jewelry, brass, copper and bell-metal wares,

woodcarving, etc. The cast-iron pillar near Delhi is evidence to the high level of metallurgy that

existed in India.

The Indian industries "not only supplied all local wants but also enabled India to export its

finished products to foreign countries."

Europe was a customer of Indian manufactures during the 17th and 18th centuries. It was this

superior industrial status of India in the pre-British period that encouraged the Industrial

Commission (1918) to record: "At a time when the West of Europe, the birthplace of modern

industrial system, was inhabited by uncivilised tribes, India was famous for the wealth of her

rulers and for high artistic skill of her craftsmen. And even at a much later period, when the

merchant adventures from the West made their first appearance in India, the industrial

development of this country was, at any rate, not inferior to that of the more advanced European

nations."

Before the British came to India, it was one of the richest countries in the world; its GDP was

almost 27% of the world GDP in the 17th century and almost 23% in a the18th century. But,

over 200 years of exploitation, loot and destruction reduced India to a poster child for third world

poverty.

By the middle of the second millennium, Middle Easterners were playing at best a secondary role

in the expansion of global commerce. During the Mughal Empire, India was the world leader in

manufacturing, producing 25% of the world's industrial output up until the mid-18th century,

prior to British rule.

British Contributions

Apart from its exploitation of the Indian economy, British rule has also its contributions in the

growth and development of infrastructure of the country which contributed a lot in the economic

growth of the country.

British government itself carried out productive investment in railways and irrigation and as a

result, there was a growth in both agricultural and industrial output. The new elite established a

Western lifestyle using the English language and English schools. New towns and urban

amenities were created with segregated suburbs and housing for them. Their habits were copied

by the new professional elite of lawyers, doctors, teachers, journalists, and businessmen. Within

this group, old caste barriers were eased and social mobility increased.

The Indian economy grew at about 1% per year from 1880 to 1920, matching population growth.

The result was no change in income levels. Agriculture was still dominant, with most peasants at

the subsistence level. Extensive irrigation systems were built, providing a drive for growing cash

crops for export and for raw materials for Indian industry, especially jute, cotton, sugarcane,

coffee, and tea.

British investors designed a contemporary railway system within the late nineteenth century—it

became the then fourth-largest within the world and was famed for the standard of construction

and services. The government was supportive, realising its price for military use and for

economic growth. The railways initially were privately owned and operated, and run by British

administrators, engineers, and skilled craftsmen. At first, only the unskilled workers were

Indians. The Bank of England records the Indian Reserve Bank held a positive balance of £1160

million, with it, on 14 July 1947, and that British India maintained a trade surplus, with the UK,

for the period of British rule.

Conclusion and Recommendation:

From the above information, it can be concluded that diversity is an influential factor for the

growth and development of entrepreneurial culture in the region. Our country has a history of

embracing foreigners from different regions. This quality has made it unique for the enlargement

of dissimilar cultures, religions, languages, customs and many socio-economical attributes. Over

a period of time, these diversified traits have positively contributed to the development of

entrepreneurial culture in this vast country.

The whole country is so much diversified that it looks like a continent. Each and every region

had its uniqueness not only in the culture and tradition but also the consumption and production

pattern. From north to south or east to west, different regions were famous for their special

products. Many of them were being exported to other parts of the world.

This flourished entrepreneurial culture has resulted in naming India as "Golden Bird", which was

destroyed during the colonial period. Albeit Britishers have also their own contribution to the

development of industrialization, infrastructure, and removal of many social evils, the period

witnessed a sharp decline of the economic conditions. Policies of the British government, not

only destroyed the economic conditions, it more grievously shattered the social fabric of the

country. Our diversity which had been fostering our economic and entrepreneurial development

was turned to the negative direction.

The long-lasting impact of colonial policies on our entrepreneurial culture may be established by

the change in our preference for a profession. Deindustrialization and dismal condition of

agriculture had compelled people to join the services of the British government. It was realized

that those who had been closer to the government had more power and were more affluent in

comparison to the others. Also, the uncertainty of other professions resulted in grooming our

society as risk averse and consequently we started avoiding entrepreneurship. This shift of

preference of profession has been so much inculcated in our mindset, that entrepreneurship is

still given last preference as a profession.

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