Entrepreneurship in the SME sector: An Assessment of India and Russia

Abstract

Since the reform processes in India and Russia there has been a progressive rise in the SME birth rate in both countries. But patterns of their growth were very different. In India the SME birth rate can be explained largely in terms of enhanced initiatives of the Government through its self-employment schemes, like PMRY, and through Entrepreneurship Development Programmes (EDPs) spread all over the country. New units which in large numbers have come up in different lines of production were created by persons from diverse occupational and social-economic backgrounds after EDP training. In Russia EDPs are yet to have come up. The emergence of SMEs in the country was a result of the privatization programmes which were fulfilled with great speed within three years. In turn this ensured a mass and constant influx of new owners into the SME sector who were neither founders of their enterprises nor trained for entrepreneurial role. That time it was a widespread thinking among our reformers that the market automatically would inculcate the spirit of entrepreneurship in new owners which in return ensure production efficiency of small and medium private enterprises. This paper is an attempt to compare Indian and Russian SMEs, as nowadays, with focus on their qualitative and quantitative characteristics, contribution to economic development and growth potential in the context of globalization. Its twin planks - economic liberalization and privatization, are commonly covered by the generic term "reform". In the case of Russia this term is used as a synonym of expression "shock-therapy". The three pillars on which the shock-therapy model of reforms stood were liberalization of prices, privatization, elimination of state monopoly on domestic and foreign trade. The result of these three actions was a quick and sudden transition from the Soviet command economy to free-market economy in which SMEs were supposed to play a significant role.