Youth Entrepreneurship: Driving India's Development
Demography is destiny. The ultimate success of a nation is contingent on how well it marshals its human resources to generate growth and development of the economy. A rising population has been a cause of concern for generations. In 1798, English Economist Thomas Robert Malthus wrote "An Essay on the Principle of Population," which postulated that populations grow at an exponential rate while resources scale at an arithmetic rate. This would result in populations exceeding the carrying capacity of the earth, leading to societal collapse. While it was in vogue for a short period, it failed to take into account technological progress and changing human behaviour. The Industrial Revolution of the 1800s and improvements in agriculture debunked the arithmetic growth rate of resources. Improvements in lifestyle and economic prospects have halted the exponential population growth assumption.
Recent reports by The Lancet forecast that by 2050, over 75% of the countries will not have a high enough fertility rate to sustain their population size. It may increase to 97% by 2100. The report states that "These future trends in fertility rates and live births will completely reconfigure the global economy and the international balance of power and will necessitate reorganising societies". Developed countries like Japan and Korea had birth rates of 1.26 and 0.78 in 2022, while China's slid to 1.09.
It is in this demographic crisis that India has a strong advantage due to its youthful populace. The median age of India is at least 10 years younger than that of China and 20 years younger than that of Japan. India's working population is expected to total two-thirds of the total population by 2025. Higher aspirations & increased demand for skilled labor lead to higher education levels. India's growing middle class of 300 million people is driving up consumption. India crossing $2000 in terms of per capita GDP is an inflection point for any economy, where consumptions shift from subsistence to consumption. This happened in the US in the 1950s, Germany in the 1960s, Japan in the 1970s, and China in the early 2000s. India hit this point in FY 19 and currently has a per capita GDP of $2500.
Democratization of Entrepreneurship
The barriers to entrepreneurship have shrunk over the past few years thanks to three major factors: 1. Technology, 2. Policy, 3. Capital.
1. Technology
The rise of GenAI is truly democratized building and development in the digital space. No longer does the lack of technical skills form a barrier towards creating digital products. NoCode platforms and GenAI tools allow every person to create apps and websites without possessing prior coding knowledge. This allows anybody with an idea to create a minimum viable product (MVP) to validate their market assumptions. This fast iteration at negligible cost lowers the cost of experimentation and allows for more ideas to reach the market, either failing or succeeding, and then scaling after. This, coupled with India's decision to allow open access to Digital Public Goods through APIs, has truly democratized access to critical infrastructure for building businesses.
2. Policy
The Indian government has, over the last 10 years, placed special emphasis on creating a policy environment conducive to entrepreneurship and risk-taking. Startup India and the emphasis on the ease of doing business have resulted in several regulatory changes to allow for easier operations and raising of funds. The emphasis on the need to reduce interface with government officials and move as many services online can help entrepreneurs scale businesses without ever having to meet a government official. The government moving out of business is a key policy plank that has accelerated entrepreneurship in the country.
3. Capital
India is a capital deficit nation. Despite this, schemes such as the Rs 10,000 Cr Fund of Funds, CGTMSE scheme, and Startup India Seed Fund Scheme (SISFS) have made access to capital far easier for the average entrepreneur. This is in addition to the SEBI Alternative Investment Fund Regulations, 2012, which has created a Rs 10.35 lakh Crore investment industry in 12 years, with a CAGR of over 112% from December 31, 2012 to December 31, 2023. Many of these AIFs invest in unlisted ventures, with investment strategies ranging from seed stage, idea stage, early stage, late-growth and late-stage ventures. There is capital available for every stage of a growing venture, with standard and transparent financing terms.
Mindset Shift
The last aspect of youth entrepreneurship is the mindset shift. Today's generation is privileged, having been born in a post-liberalization India with easy access to cheap data, handsets and compute technology that previous generations never had. The Indian mindset of being risk-averse has fallen away. Parents are open to their children starting up and building a business, as opposed to working a standard job.
The India of today has a convergence of factors that makes it the best time for youth to start a business. It does not have to be a tech-first business, but technology will play an undeniable role in the growth of any business. What matters is to start. There is no right or wrong way to start - entrepreneurship is agnostic to the approach. What matters is the goal and the effort in the journey, not the starting point. There is no right or wrong way - there's only momentum or retreat. But it all begins with a single step. Take that step today.