ANNAMALAI UNIVERSITY

Department of Business Administration

SEMINAR TOPIC
ON
ENTREPRENEURSHIP AND BARRIERS TO ENTREPRENEURSHIP

Name : SHIJO.K.A

Roll No : 06

Course : MBA II YEAR

Batch : “H”

Subject : 302 PROJECT, ENTREPRENEURSHIP AND SMALL

BUSINESS MANAGEMENT

Submitted to : Mr. Gopinath

Faculty
Department of Business
Administration

Annamalai University
 Meaning of Entrepreneurship
Entrepreneurship is the attempt to create value through recognition of business opportunity , the
management of risk taking appropriate to the opportunity , and through the communicative and
management skills to mobilize human , financial and material resources necessary to bring a project to
fruition. Taken from the “Conference on Entrepreneurship held in USA ”

Barriers to Entrepreneurship

Access to Relevant Information

An entrepreneur starting a business requires access to reliable information on various aspects of
business such as regulatory issues ,statutory compliances, registration processes, available
sources of finance, infrastructure and so on. However in India, this information is largely
diffused and dispersed. The lack of readily available information compels new entrepreneurs to
employ intermediaries to advise them on essential aspects of starting a business, thereby
incurring additional costs. Over one-third of the entrepreneurs interviewed said they had faced
problems because of lack of information at the start up stage. While most entrepreneurs
highlighted this problem, it was found to be the most severe for entrepreneurs under the age of
35, with 42% of such entrepreneurs highlighting information deficit as a major hurdle

Ease of Starting and Operating Business

Difficulty and delays in meeting various government requirements such as registration of company,
obtaining licenses and registering property still confront entrepreneurs. The World Bank report,
‘Doing Business in South Asia 2007’ says that, it takes 35 days (in Mumbai)to 52 days (in New
Delhi) to start a business in India. The official costs of starting a business are high and the process
quite complex ,involving no less than 13 procedures. 158 A large number of separate registrations –
Tax Account Number (TAN), Permanent Account Number(PAN), Value Added Tax (VAT),
Employees Provident Fund Organization(EPFO), Employees State Insurance Corporation (ESIC),
among others –are required for any business to start operations. Registering property itself requires
six procedures and an average of 62 days. 159 Differentiates of stamp duty and transfer charges exist
across states. Apart from these initial procedural hurdles, an entrepreneur also has to obtain other
permits and clearances, both at the central and state levels. These include land use approvals,
building permits, power connections, water and sewerage connections, and so on. Even in states
where the Single Window System has been put in place, most entrepreneurs do not find them
satisfactory; ‘there is a single window but many ventilators’, as an entrepreneur from Hyderabad
aptly put it.160 About50% of the entrepreneurs interviewed claimed to have problems while applying
for and obtaining various clearances and licenses. However, the perception regarding licenses has
gradually improved over the years.
Corruption:
Almost 60% of the entrepreneurs interviewed said they faced corruption at some time during their
entrepreneurial journey while dealing with governmental procedures and officials. That is a very
disturbing statistic
Taxation
Entrepreneurs also faced problems relating to cumbersome tax procedures as well as multiplicity
of taxes. According to the World Bank-IFC Report, ‘Doing Business 2008’, India’s tax regime
requires 60separate payments every year.168 Collection of taxes through different government
agencies also increases the problems of complying with tax regulation. There also exists a
multiplicity of taxes. In addition to service tax, CENVAT and custom duties that are imposed by
the central government, state and local levels of governments levy respective state VAT/sales
tax, entertainment tax and entry tax.169.About 27% of entrepreneurs interviewed said they had
faced problems because of multiplicity of taxes alone; 13% faced a problem with complexity of
procedures alone and 26% faced problems with both. In other words, 66% of the entrepreneurs
interviewed, i.e. two out of every three entrepreneurs, faced difficulties with regard to some
aspect of taxation - the multiplicity of taxes or the complexity of filing procedures, or both.
Legal System
Of the entrepreneurs interviewed, 43% said they find the current legal procedures and requirements
to be either ‘extremely unsatisfactory’ or ‘somewhat unsatisfactory’). Their complaints largely relate
to procedures of law such as the slow pace of enforcing contracts as well as the current bankruptcy
and labour law procedures. 19% of the entrepreneurs interviewed said they feel constrained by labour
laws(see Figure 6.1). According to the World Bank-IFC’s DoingBusiness2008’ report, it takes on an
average, 10 years to complete bankruptcy proceedings in India. Further, claimants can expect to
recover an average of less than 11.6 cents on the dollar. While official liquidators are appointed to
carry out liquidations, the procedures are often long drawn. Another legal issue is that of unlimited
liability for promoters in partnership concerns and proprietorship businesses due to the absence of
Limited Liability Partnerships (LLPs) as a legal entity in India
Infrastructure
The reliability and availability of world-class infrastructure services is critical for the growth of
Entrepreneurship. India’s physical infrastructure– roads/highways, railways, ports, airports,
power, telecom – is seen as a bottleneck to the smooth operation of all economic activity. The
high transport and supply-chain costs that poor infrastructure entails are significant, particularly
for a small entrepreneur. Enterprises surveyed in the Global Competitiveness Report 2007-08,
rated inadequate infrastructure as ‘the most problematic factor’ for doing business inIndia.180 In
this report, while India scores well on ‘soft’ parameters such

General Government Facilitation:

The NKC Study found a significant majority of entrepreneurs saying that the government is generally
‘not helpful’. In the interviews, 61% of the entrepreneurs rated ‘helpfulness of government’ as
‘extremely unsatisfactory’ or ‘somewhat unsatisfactory’ (see Figure 6.8). Some entrepreneurs said
that while the government has some very significant policies to help entrepreneurs, the
implementation of these policies is extremely poor. Some were of the view that government schemes
and initiatives are not publicized adequately. Others said that corruption and red-tapism result in the
schemes not reaching the targeted people. Currently, there are a number of policies and schemes in
place to promote and assist entrepreneurs in India, at central and state levels. 184 The Ministry of
Micro, Small and Medium Enterprises also provides a package of incentives and subsidies for the
promotion of micro and small enterprises The challenge is to make the policies into catalysts for
driving Entrepreneurship in India.