Why are Entrepreneurs good for the Economy

An oft-repeated refrain from business leaders has been the emphasis on ‘fostering an entrepreneurial spirit’ amongst the youth of our country. It is even a common complaint that Indian B-school campuses do not do enough to encourage an entrepreneurial spirit, preferring rather to prepare students to be good corporate employees.

From the government as well there have been several initiatives towards fostering an entrepreneurial spirit, of which the ‘Startup India’ initiative is only the most recent. Even ‘Make in India’ had a strong push towards promotion of entrepreneurship in India.


But what is it about entrepreneurship that is seen as so valuable to an economy? Let us look at some of the critical benefits that entrepreneurs bring to a country:

Employment creation

By the definition of the term, the entrepreneur creates new businesses, and new businesses hire people. The generation of employment, especially in a labour-surplus economy like India, is a top priority for the country. As these businesses scale in size, the need for employees grows, from accountants to forklift operators to sales staff, and that means a long-term benefit to the country as whole.

Of all the positive impact of the entrepreneurial spirit, this is by far the mot important. It is manifestly clear that government employment cannot be the answer to an unemployment problem. Moreover, as the dependence of agriculture decreases, the need to provide alternate employment acquires critical importance. Only by creating an environment where new businesses can flourish and grow, can India hope to provide productive employment for its population.

Tax contribution

For all the facile talk of how businesspersons avoid income tax (not unjustified), there are other taxes that are paid by businesses that are just as important to run the economy. Excise, customs and service tax are paid by business-owners and these are critical for the government to meet its revenue targets. In addition, the more businesses there are, the more employees they hire who, in turn, are enabled to pay taxes. The end result is a multiplier effect for the government’s coffers.

It is these tax revenues that are used to provide education, healthcare and infrastructure throughout the country.

Demand creation

At a national level, the economy is driven by demand. The presence of demand for goods and services indicates the health of an economy. More demand fuels increased business activity, leading to more job creation, more tax revenue and so on.

A new business brings with it a host of additional demands as well. Raw materials, services, funding – all become a need that is filled by further entrepreneurial efforts. Every business, as it grows, supports several other businesses, and thus creates synergistic waves throughout the economy in all sectors it is involved with.


New businesses bring forth innovation.  From Microsoft to Apple, Infosys to Tata Steel, all were start-ups once, run by a group of individuals with a dream. They changed the paradigm of business, through new products, new technology, new ways of working and exploring uncharted territory. In doing so they not only benefited the economy of their countries, but brought a sense of pride of ownership to their countrymen.

In conclusion, entrepreneurship is the foundation of a modern economy. Without a strong spirit of innovation and risk-taking, no economy can prosper for an extended period of time.

Let us hope that the impetus provided by the Government’s campaigns bears fruit and succeeds in creating the environment for India to become a world leader in innovation and entrepreneurship.


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