Entrepreneurship and Wealth Creation at the Grassroots

India ranks third in number of new firms created, as per the World Bank.

• New firm creation in India increased dramatically since 2014:
  • 12.2 % cumulative annual growth rate of new firms in the formal sector during 2014-18, compared to 3.8 % during 2006-2014.
  • About 1.24 lakh new firms created in 2018, an increase of about 80 % from about 70,000 in 2014.
• Survey examines the content and drivers of entrepreneurial activity at the bottom of the administrative pyramid – over 500 districts in India.
• New firm creation in services is significantly higher than that in manufacturing, infrastructure or agriculture.
• Survey notes that grassroots entrepreneurship is not just driven by necessity.
• A 10 per cent increase in registration of new firms in a district yields a 1.8 % increase in Gross Domestic District Product (GDDP).
• Entrepreneurship at district level has a significant impact on wealth creation at the grassroots.
• Birth of new firms in India is heterogeneous and dispersed across districts and sectors.
• Literacy and education in a district foster local entrepreneurship significantly:
  • Impact is most pronounced when literacy is above 70 per cent.
  • New firm formation is the lowest in eastern India with lowest literacy rate (59.6 % as per 2011 Census).
• Ease of Doing Business and flexible labour regulation enable new firm creation, especially in the manufacturing sector.
• Survey suggests enhancing ease of doing business and implementing flexible labour laws can create maximum jobs in districts and thereby in the states.