The Government of India (GoI) recognises entrepreneurship as one of its key strategies to drive growth and wealth creation. Given the 'Startup India' initiative of GoI, our study examined the content and drivers of entrepreneurial activity at the bottom of the administrative pyramid – across 500 districts.
The analysis uses comprehensive district-level data on new firm creation in the informal sector across these districts from the Ministry of Corporate Affairs (MCA)-21 database. The study confirms India's third position for number of new firms created in the World Bank’s Data on Entrepreneurship.
The data shows that new firm creation in the formal sector grew at a CAGR of 3.8 per cent from 2006-2014 to a growth rate of 12.2 per cent from 2014 to 2018. As a result, from about 70,000 new firms created in 2014, the number has grown by about 80 per cent to 1,24,000 new firms in 2018. Reflecting on India's new economic structure, the study finds that the services sector has a comparative advantage in new firm creation, over other sectors like manufacturing, infrastructure or agriculture.
The study finds that a 10 per cent increase in registration of new firms in a district yields a 1.8 per cent increase in GDDP (Gross Domestic District Produce), thereby proving that entrepreneurship at the bottom of our administrative pyramid significantly impacts wealth creation at the grassroots level. It also found the birth of new firms to be 'very heterogeneous' across Indian districts and sectors. In India, it is dispersed across and not restricted to just a few cities.
Our earlier findings, that literacy and education in a district foster local entrepreneurship significantly, gets re-affirmed here again.