Monday, April 6, 2009

Economic crisis and entrepreneurship in India and China

If media estimates of job losses is to be believed, India appears to have done far better than China. As the global economy has moved into recessions, China's exports have declined steeply, putting an estimated 15-20 million rural migrant labor in tens of thousands of small factories that undergrid its spectacular economic growth of the past two decades. In contrast, while itself being deeply affected by the global slowdown and economic growth forecasts almost halving, the extent of job losses in India is not in the same scale as in other major economies.

MIT Professor Yasheng Huang has two interesting observations on entrepreneurship in India and China, especially relevant in light of the ongoing economic crisis and its impact on job losses.

1. India never had the revolution in rural entrepreneurship as China had in the eighties and nineties. Prof Huang makes a very important point, "Its farmers, because of lack of funding and lack of basic human capital, have never been as entrepreneurial and dynamic as their Chinese counterparts. While many Western analysts bemoan the lack of highways and foreign investment in India, in reality, the true obstacle to a broad-based development in India is its deficit in rural entrepreneurship."

2. The quality of Indian entreprenership is far superior to their Chinese counterparts and their businesses are buiilt on more solid long-term foundations. Indian entrepreneurs have invested heavily in their employees, created a rudimentary human resource and financial control system, and adopted many of the basic marketing tools and principles taught at Western business schools, all of which have helped them withstand the troubled times more effectively than the Chinese.

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