Despite all the fuss about offshoring to Bangalore, Amar Bhidé claims it can’t transform India’s economy. Here, he explains the reforms needed to spur business growth and put India on the fast track.
What overarching question were you trying to answer when you began looking at entrepreneurship in India?
My broad question was, to what degree do the patterns that I and others have observed in fast-growing companies in the United States hold true in India and, in particular, in Bangalore? The answer is, not very much. In the United States, many firms start small and stay small. But roughly 5 percent grow quite dramatically. In any metropolitan area, that 5 percent can be expected to grow at a compounded rate of about 15 percent over the next five years. I found in Bangalore that the proportion of firms that grow at this rate is of the order of 1 percent rather than 5 percent.
Another difference is that in the United States the expansion of existing firms accounts for roughly 75 percent more jobs than the birth of new firms. In Bangalore, the jobs created through the birth of new firms are 11 times more than the jobs created through expansions. I further found that to the degree that there are any large businesses at all, they were large to start with. So you see either businesses that have to be started on a large scale or tiny firms that never grow.
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