Everything you need to know about the roles played by an entrepreneur. The entrepreneur plays a vital role in nurturing economic growth and development of an economy.
One has to understand that in reality, a successful entrepreneur contributes in many ways to the economy. The entrepreneur plays multi-dimensional roles associated with the entrepreneurial pursuit.
Entrepreneurship is an essential and necessary growth booster of an economy. The entrepreneur influences different sectors of the economy with his/her entrepreneurial decisions and actions.
The entrepreneurial actions and initiatives affect the industrial sector, agricultural sector, technological sector, internal and external trade, employment level, and overall impact on the society. In a market economy, an entrepreneur plays a vital role. The entrepreneur plays the role of catalyst and provides momentum to the economy by activating and stimulating different sectors of the economy.
ADVERTISEMENTS:
Learn about the roles of an entrepreneur in:-
1. Economic Growth 2. Generation of Employment 3. Bringing Social Stability 4. Earning Foreign Exchange 5. Import Substitution 6. Export Promotion and Import Substitution 7. Development of Special Economic Zones 8. Forex Earning.
Some of the roles of an entrepreneur in economic growth are:-
1. Optimum Utilisation of Natural and Human Resources 2. Helpful in Capital Formation 3. Generation of Employment 4. Balanced Regional Development 5. Improvement in Living Standard 6. Creativity and Innovation 7. Economic Independence and 8. Establishing New Venture.
ADVERTISEMENTS:
Some of the roles played by an entrepreneur in generation of employment are:-
1. Establishment of New Business & Industries 2. Increment in National Income 3. Improving Living Standard 4. Assist in Development of Infrastructure 5. Innovation Promotion.
The roles of an entrepreneur in bringing social stability are:-
1. Objective of Self-Sufficient Society 2. Enrichment of Ethical Values 3. Social Development 4. Changes in the Social Framework 5. Control on Social Evils 6. Removal of Economic Problems 7. Provision of Employment Opportunities 8. Removal of Poverty 9. Improvement in Standards of Living 10. Social Changes.
ADVERTISEMENTS:
The roles played by an entrepreneur in earning foreign exchange are:-
1. Production of Products and Services 2. Minimise Foreign Dependence 3. Production of Import Substitution Items 4. Innovative Approach 5. Increase in Exports 6. Industrial Progress.
The roles of an entrepreneur in import substitution are:-
1. Saving of Foreign Exchange 2. Creation of Employment Opportunities 3. Self-Reliance and 4. Accelerating the Pace of Industrialisation.
ADVERTISEMENTS:
The roles of an entrepreneur in export promotion and import substitution are:-
1. Removing the Trade Imbalance 2. Reduction in Import 3. Economic Development 4. Increment in Foreign Currency Fund 5. Advance Technology 6. Appreciation in Production and Productivity Level 7. Low Production Cost 8. Enhancing Foreign Competition Capacity 9. Increasing Export 10. Introduction to Industrial Culture and Corporate Service.
Role of Entrepreneurs – In Economic Growth, In Generation of Employment, In Bringing Social Stability and a Few Other Roles
Role of an Entrepreneurs – 8 Important Roles in Economic Growth: Optimum Utilisation of Natural and Human Resources, Helpful in Capital Formation and a Few Other Roles
An Entrepreneur plays a vital role in economic growth of a country. He collects and exploits the natural and human resources and then through innovation he utilizes these resources in an optimal manner. He provides or generates lot of employment amongst people and bring stability in economy.
Through establishing new industries and venture in far flung and backward areas, he plays a prominent role in export promotion and import substitution. An entrepreneur uses innovation and advanced technology in reducing cost of production and maintaining quantity of product as well as quality of product.
ADVERTISEMENTS:
Thus, an entrepreneur does all those efforts which can pursue the pace of economic growth, employment creation, balancing regional development and maintaining economic stability.
The term economic growth implies growth in any economy. The rising way of trend per capita income and gross income in certain time period is called economic growth. Economic growth of a nation is never by accident. It is always a matter of design. It is brought about by persistent effort of the Govt. in general and of entrepreneur in particular. It is important because the society has not been able to sustain the well-being of its people without continuous growth, so economic growth is a requisite for growth and prosperity.
Actually, economic growth is a means to an end, and the end is human development. It contributes in poverty reduction when it expands the employment productivity and wages of poor people.
In the process of entrepreneur growth of a country, the entrepreneur plays a motivator role. The process cannot proceed onwards without the active support of the entrepreneur.
ADVERTISEMENTS:
Joseph A. Schumpeter says that, “the rate of economic progress of a nation depends upon its rate of innovation which in turn depends upon distribution of entrepreneurial talent in the population.”
There are different types of development in an economy i.e., human development infrastructure development, social development, industrial development and economic development. An entrepreneur plays their role as catalytic agent in the process of economic development. In recent time, the role of an entrepreneur has been appreciating day by day.
On the basis of study we can explain the role of entrepreneur in following manner:
1. Optimum utilisation of natural and human resources
ADVERTISEMENTS:
2. Helpful in Capital Formation
3. Generation of employment
4. Balanced Regional Development
5. Improvement in living standard
6. Creativity and Innovation
7. Economic Independence
ADVERTISEMENTS:
8. Establishing new venture
The description of each point are given as below:
Role # 1. Optimum Utilisation of Natural and Human Resources:
Each country has natural resources and entrepreneur exploit it for production purpose. Firstly, entrepreneur organise the resources of venture such as land, manpower, capital and technology and then it use for production purpose.
Role # 2. Helpful in Capital Formation:
An entrepreneur start up different types of industries, businesses and introduce new types of venture in economy, and raising funds through income as per tendency of saving. He save money and invest in project and after that he uses the invested amount in exploiting the resources of nation.
Role # 3. Generation of Employment:
An entrepreneur creates employment in direct and indirect manner through establishing large and small size of units that provides employment. Thus entrepreneurship is helpful in alleviating unemployment problem.
Role # 4. Balanced Regional Development:
Entrepreneurship is helpful in reducing the inequalities of income and wealth. To meet out the purpose, entrepreneur set up the industries in backward and poverty based areas.
Role # 5. Improvement in Living Standard:
ADVERTISEMENTS:
An entrepreneur assists in direct way for improving living standard of people. He starts up different types of new ventures to generate employment.
With the earned income, a person spends earnings to meet out the basic and comfortable needs along with branded product or services at cheaper rate. It is the initial indication of improvement in living standard.
Role # 6. Creativity and Innovation:
Creativity and Innovation are ability of bringing renovation. Through innovation, an entrepreneur makes something new and creativity is the prime stage of innovation. Creativity is valueless when it is not converted into product and services.
Role # 7. Economic Independence:
An entrepreneur does all efforts in creating the environment of economic freedom. For this purpose, an entrepreneur along with encouragement to produce more sound products or services within country face the competition at international level. He emphasises on production at minimum cost and standard product.
He adopts product diversification techniques and through more production fulfils the internal and external demand. By selling the product in foreign countries, he assists in maintaining economic freedom within country.
Role # 8. Role of an Entrepreneur in Economic Growth as an Innovator:
The entrepreneur’s role has been recognised as an innovator. A person who cannot perform as an innovator, cannot address himself as an entrepreneur. According to Schumpeter an individual who has an innovative quality, is called an entrepreneur. Entrepreneurship essentially means doing things that are not generally done in ordinary course of business.
ADVERTISEMENTS:
An entrepreneur discovers and develops new ideas; new products; new methods of production; opening new markets; new sources of raw materials; new type of industries & enterprises; new methods of business problems; new organisations; new combinations & new opportunities. Innovation is the process of new ideas into action. It involves initiating and constituting change in the structure of business and society. Entrepreneurs do different things in different ways.
An entrepreneur discovers an idea and develops it into a business proposition. He establishes new enterprise on the basis of his own innovation ideas. He takes initiative to explore the innovation so as to excel others.
Basically, we can say an innovator is a creative person because creativity is a prerequisite for innovation and can be developed in any individual where there is concern for excellence. He conceives a creative idea and develops the idea into a business proposition, acquires resources such as land, labour, capital and produces goods and services with cooperation and support from external sources that can influence the success of an innovation.
According to Joseph Schumpeter, “An entrepreneurship is a creative activity and an entrepreneur is an innovator who introduces something new in an economy.”
According to him, innovation may be in:
i. Introducing a new manufacturing process that has not been tested and commercially exploited.
ADVERTISEMENTS:
ii. Introducing a new product with which consumers are not familiar or introducing a new quality in an existing range of products.
iii. Opening a new market where company products were not sold earlier.
iv. Locating a new source of raw material or semi-finished products.
v. Developing a new combination of means of productions.
Thus, it is clear that an entrepreneur is essentially an innovator.
Role of Entrepreneurs – In Generation of Employment
Unemployment is a global phenomenon and has emerged as a burning problem of the day. Unemployment is a common problem whether it is backward economy, developing economy or even in developed economy.
ADVERTISEMENTS:
This problem of unemployment is becoming serious day by day. An entrepreneur generates employment opportunities both directly and indirectly. Economic growth does not always lead to employment. It must be created in the field like agricultural sector, industrial sector, small scale industries, education and health, information technology.
Employment can be generated in organised sectors and unorganised sectors and their role in employment generation are as follows:
i. Establishment of new business & industries.
ii. Increase in national income.
iii. Balanced Regional Development.
iv. Diffusion of economic strength.
v. Generation of employment.
vi. Improving Living Standard.
vii. Economic Freedom.
viii. Creativity & Innovation.
ix. Assist in development of infrastructure.
x. Establishing new industries & business units.
xi. Promotion to Innovation.
The description of every point is given as follows:
i. Establishment of New Business and Industries:
Somebody said truly that “Business is a game of skill which cannot play everybody.” For generating employment, entrepreneur sets up small and large size of industries and business and provides employment to millions of people. Thus entrepreneurship is the best way to fight the evil of unemployment and generate employment opportunities in the country.
ii. Increment in National Income:
National Income refers to produced product and services in a country in a specific year. The manufactured products and services are consumed in domestic level and exported to other countries. By introduction of innovation, product quantity and variety is improved and as the increase in population, demand is also increased, so as to meet out the demand of product. Production also increases and generates more employment amongst people.
iii. Balanced Regional Development:
When the industrial developments are limited to few areas, in this situation, the only concerned area is developed condition. Through innovation, entrepreneurship develops both public and private sector and reduced economic disparities of nation. They get benefit and incentives which are given by government, when an entrepreneur start industries in backward areas.
iv. Diffusion of Economic Strength:
The whole world has been controlled by economic powers.
We can divide the strength in two parts:
a. Physical Strength
b. Economic strength.
The main resource of economic strength is industrial and commercial activities which makes economies strong on development basis. But the rising trends of entrepreneurs helps in decentralising power and remove monopoly tendency amongst rich countries. Entrepreneurs establish new units in different areas of world and generate employment in unemployed mass.
v. Generating Employment:
For making the economic growth, entrepreneur establishes different types of industries and business and generate employment to millions of people.
vi. Improvement in Living Standard:
By establishing new type of industries and using innovation, an entrepreneur produces necessary products & services and remove their deficiency from market. They produce branded and sound quality products at cheaper cost and make easy approach to customer and assist in increasing the living standard of people.
vii. Economic Freedom:
An entrepreneur does all the efforts in creating the environment of economic freedom. For this purpose, entrepreneur encourages to produce more sound products/services within country facing the competition at international level.
He emphasises on production at minimum cost and standard full product, he adopts product diversification technique and through more production, fulfills internal demand and meet also external demand. By selling the products in foreign countries he earns foreign currency and assists in maintaining economic freedom in country.
viii. Creativity and Innovation:
Creativity and Innovation are abilities of bringing renovation. Through innovation, an entrepreneur makes something new and creativity is the prime stage of innovation. Creativity is valueless when it is not to be converted into product and services.
ix. Assistance in Development of Infrastructure:
Infrastructure plays an important role in economic development. Infrastructure includes insurance, banking, industry and transpiration facilities, energy.
x. Establishing New Industries and Business Units:
An entrepreneur sets up new type of business and industrial units and assists in transferring the production factor in productive function. Without active participation of entrepreneur, all factors are just like rock.
xi. Innovation Promotion:
For innovation an entrepreneur emphasize on research & development and encourage innovation. By innovation, he makes new things, introduce new production techniques, plant, raw material, new technology, search new market etc.
Role of an Entrepreneurs – In Bringing Social Stability: Objective of Self-Sufficient Society, Enrichment of Ethical Values, Social Development and a Few Others
1. Objective of Self-Sufficient Society:
Society needs goods and services as a source to improve their well-being. The entrepreneurs try to increase the production through their business enterprises, producing goods and services as per the needs of the local community, providing employment to people to earn their income and improve their savings and capital formation, contribute towards export promotion and import substitution etc.
Thus/the entrepreneurs through their behaviour fulfil the dream of establishment of a self-sufficient and stable society.
2. Enrichment of Ethical Values:
The entrepreneur develops the ethical values for the society to ensure social stability. He stresses upon maintaining moral values, ideals and standards in the managerial process of various business activities. Entrepreneur is a part of whole value system of the society.
3. Social Development:
Entrepreneurs are part of the society and society is developed by the entrepreneurs. Entrepreneurs are required to create business organisation and through this organisation they have to fulfil their dream to earn profit and producing goods and services for the benefits of the society at large.
They make best possible efforts for utilisation of available physical and human resources, providing employment to local people and also fulfilling his social responsibilities towards various groups of the society. Each segment of society has a right to get job opportunities in business enterprise if they have necessary qualification and experience etc.
4. Changes in the Social Framework:
Entrepreneurs make changes in the social framework with the help of latest innovations. These innovations facilitate society’s progress by introduction of new products, new markets, new techniques, new sources and establishment of new industries, innovations are responsible for change in design and style of consumption behaviour which ultimately increase the level of society.
5. Control on Social Evils:
Entrepreneurs are also making efforts for the development of social endowments. These endowments include development of education, health, social welfare services and transport facilities. These endowments improve the level of thinking of the society. These entrepreneurs are responsible for establishment of new industries and expansion of the existing industries.
Entrepreneurs also provide employment to needy persons and encourage them towards creativity or entrepreneurship. It raises the standards of living of such people, which will be helpful in removing of several social evils. Employment is a path of creation of moral values in society.
6. Removal of Economic Problems:
There are certain problems like, class conflicts, polluted environment, slum areas and social crimes, etc. which affect the Indian Society most. Entrepreneurs through their tiny, small, medium and large enterprises are trying to give purchasing power to the unemployed persons of the society. It eliminates class conflict in the society. Development of rural entrepreneurship also got success in controlling social crimes.
7. Provision of Employment Opportunities:
The entrepreneurs increase the opportunities for employment. They establish new enterprises and expand the existing establishments in different areas of the country. Growing level of entrepreneurial profit and retained earnings further improve the business operation and consequently further employment improve the opportunities.
8. Removal of Poverty:
The entrepreneurs are responsible for creating direct and indirect employment opportunities to the unemployed persons. Increase in scale of production, development of new products and expansion of new enterprises and markets have to increase the level of employment opportunities in the country.
Thereafter, people get earnings for their survival and enjoyment of life. Due to increase in income people further create more demand for products and services. Consequently; poverty gets reduced in the country. In this regard, Nurkse has stated that, “The entrepreneurs enlarge the path of economic progress, through which the country gets rid of the vicious circle of poverty.”
9. Improvement in Standards of Living:
The entrepreneurs are known for their new techniques, new products and new markets. These efforts enable the society to consume variety of products and services. Increase in availability of adequate and innovative products and services improve the standard of living of the society. Growing level of consumerism further creates the scope of innovations.
10. Social Changes:
New ideas are responsible for creativity. Creativity in turn is the basis for innovations. Viable innovations fuel the entrepreneurial actions. Thus, entrepreneur is a creative agent of social change. Each and every segment of the society become the partner in the progress of the country. Actually these measures ensure a dynamic and stable society in the country.
Role of an Entrepreneurs – In Earning Foreign Exchange: Production of Products and Services, Minimise Foreign Dependence, Production of Import Substitution Items & Others
Increasing space of global village ensures free movement of man, material and money from one country to another country. Saving of foreign exchange is also necessary to check the vicious circle in import-export. Improving entrepreneurial behaviour leads to higher level of production and increases the earning of foreign exchange.
In this context, role of entrepreneurs can be assessed in following ways:
Role # 1. Production of Products and Services:
Entrepreneurs produce the goods and services. They are using their surplus production for exports. Export efforts enable them to identify the further scope of exports of other products. Thus, exports create temptation among the entrepreneurs to produce a variety of products and services for earning more foreign exchange.
Role # 2. Minimise Foreign Dependence:
Imports are always costly in terms of foreign exchange as well as in terms of trade. Entrepreneurs have to play their role in this context. Entrepreneurs through their innovative behaviour can easily produce goods and services which can be treated as a substitute for imported items. By this process, they can minimise foreign dependence for the supply of goods and services in the country.
Role # 3. Production of Import Substitution Items:
The Government of India has completely banned the import of some commodities, whereas import of some other goods and services has been declared as restricted items. In such conditions, entrepreneurs may fulfil the need of earning foreign exchange by producing commodities included in list of import substitution.
Role # 4. Innovative Approach:
The entrepreneur is always ready to take the advantages of all favourable opportunities. He carries out production by suitably identifying the opportunities and also starts providing new range of services in the foreign market.
Role # 5. Increase in Exports:
Entrepreneurs search viable opportunities in diversified export items. In some cases, Government also provides incentives for the production of exportable items. The combined effect of these measures increases the level of export.
Role # 6. Industrial Progress:
Concept of global village has created an environment of competition and cost effectiveness. Entrepreneurs ensure a speedy industrialisation and target the large scale production. In this way they can easily compete with foreign producers and get the foreign market under their control.
Role of an Entrepreneurs – In Import Substitution (With Suggestions to Improve Import Substitution)
Entrepreneur is the most important factor in the economic development of the country. He plays a very important and catalytic role in activating the factors of production leading to the overall economic development. The entrepreneur organises and utilises the various factors and sets productive machinery in action. The availability of entrepreneurs, therefore, is the precondition of economic growth.
According to Prof. Schumpeter, the supply of entrepreneur depends on the rate of profit and social climate. It is profit that induces the prospective entrepreneur to get into the business and start new activities or expand the existing activities. Profit, therefore, is a factor which induces the entrepreneur to organise and utilise the factors of production for development.
Entrepreneur is an innovator with a certain achievement motive and that achievement motive may also mean something more than money. Social climate also plays its role in attracting prospective entrepreneur to innovate, assume risk and face the music of uncertainty.
According to Prof. Schumpeter, there is high degree of risk and uncertainty in economic world and in this context, entrepreneurial behaviour is important as development is a discontinuous process which itself proceeds with spurts.
Entrepreneurial behaviour has a role in ensuring the change required by the development process. Entrepreneur brings innovation or technical know-how to introduce new products and new combinations of production factors. Economic system has a reservoir of unused technical inventions which can be early utilised by the entrepreneurs. According to Prof. Schumpeter, “It is no part of his function to find or to create new possibilities. They are always present, abundantly accumulated by all sorts of people.”
Entrepreneur also mobilises capital source to have a command over factors of production. Prof. Schumpeter rightly observed that entrepreneur needs credit because credit promotes industrial development which in turn deliver new goods. So, resource mobilisation efforts of entrepreneur also ensure the better good effective utilisation of resources available in the country which further celebrates the pace of economic development.
The role of entrepreneurs in import substitution can be assessed in the following ways:
1. Saving of Foreign Exchange:
Entrepreneurs are also producing goods and services which can be used for those products which are being imported from foreign country. By producing substitute products and services, entrepreneurs try to save valuable foreign exchange. At a later stage, consumer becomes habitual of substitute products.
2. Creation of Employment Opportunities:
When entrepreneurs produce the goods and services in the country which can be used as a substitute of the imports, employment opportunities are generated in the country and utilisation of capital also becomes possible.
3. Increase in National Income:
Import substitution efforts also help to save foreign exchange which ultimately leads to increase in national income. Any increase in national income improves the well-being of the society. It also enables the country to optimise the use of available resources in the country.
4. Self-Reliance:
Import substitution reduces the dependence on imports from foreign country. Various entrepreneurial activities for increasing production and services not only reduces the dependence on imports from foreign countries, but also reduce the foreign exchange crisis. It also motivates other potential entrepreneurs to get involved in these activities.
5. Accelerating the Pace of Industrialisation:
Import substitution efforts accelerate the pace of industrialisation in the country. Entrepreneurs are generally encouraged by the incentives and subsidies to work for import substitution efforts. They invest more capital to enlarge the scale of production. In this way, they try to supply quality goods and services to the society and thereby restricting the imports and thus, saving the foreign exchange.
Suggestions to Improve Import Substitution:
Following suggestions are to be implemented to make the import substitution more effective:
1. Priority should be given to production of those goods which are not being produced in the country. For this purpose foreign collaboration should be encouraged in each and every desired segments.
2. Incentive for import substitution should be allowed on the lines of cash incentive scheme.
3. Concessional funding arrangement should be given to those production units which are engaged in production of goods under import substitution.
4. Import duty should be reduced with reference to goods under import substitution.
5. Exemption in custom and excise duties should be given in case of raw materials used for production of goods under import substitution.
6. Concessional tariff policy should be formulated for import of coal etc.
7. Necessary exemptions should be allowed in income tax, sales tax and additional depreciation for production of goods under import substitution.
Role of an Entrepreneur – In Export Promotion
An entrepreneur plays an important role in export promotion and import substitution.
Export Promotion refers to that effort which is done by an entrepreneur for removing imbalance by increasing export and decreasing import. It may be defined as the govt. policy designed to encourage the exporters to export more goods from the country than previous or it refers to policies and measures which can result into maximum increase in the exports of a country.
Objectives of Export Promotion:
1. Correction of unfavourable balance of trade
2. Reduction of foreign loans
3. Achievement of self-reliance
4. Exporting new products
5. Defraying the cost of defence imports.
6. Ensuring successful planning.
Export promotion reduces unfavourable balance of trade, decrease imports and increase exports. It also increases valuable foreign currency reserves. There are various facilities, incentives, and subsidies which are provided by central govt. and state govt. in the field of export promotion. The Government offers the benefits of incentives, concession and subsides.
Role of an entrepreneur in export promotion are as follows:
1. Removing the trade imbalances.
2. Reduction in Import.
3. Rising trend of internal trade.
4. Economic Development.
5. Increment in Foreign Currency Fund.
6. Introduction to Innovation.
7. Advanced Technology.
8. Appreciation in production and productivity level.
9. Low production cost.
10. Enhancing foreign competition capacity.
11. Increasing export.
12. Introduction to industrial, service and corporate culture.
13. All benefits to customers such as reasonable and durable product, less price product and standard quality.
The brief description of each point are as below:
1. Removing the Trade Imbalance:
The entrepreneurs plays an important role in case of removing the trade imbalances. More production is the right way of export promotion. If an entrepreneur wants to promote the export, he can do with the more production, standardisation, brand, low production cost. “More production with low production cost with higher standard quality.” By this way, an entrepreneur helps in removing the trade imbalance.
Under trade balance only goods are included, services are not the part of trade. But in increasing production, entrepreneur can sell surplus production to other nation and adjust the due amount.
2. Reduction in Import:
An entrepreneur plays an important role in reduction of import. He imported raw material, manpower, machinery, tools, equipment, expertise and fished goods from other nations at high cost. In this situation entrepreneur should exploit natural resources by using domestic manpower and reduced cost of production. It would be reduced import in future.
3. Economic Development:
Economic independence is the symbol of economic development. Entrepreneur can produce more output and meet out the internal and external demand, and earn foreign currency. To fulfill the respective purpose both private and public sector should enhance all infrastructure facilities (energy, industry, transportation, communication and Banking) which is helpful in achieving the targets.
4. Increment in Foreign Currency Fund:
An entrepreneur plays an important role in increasing foreign currency fund. We get foreign currency from the export promotion. If govt. is promoting the export policy, in this situation, entrepreneur collect the foreign currency fund by producing more and sound products and services.
5. Introduction to Innovation:
An entrepreneur should adopt innovation by introducing new combination of goods. By adopting innovation entrepreneurs promotes new product, goods and product exchange and diversification of product in venture.
6. Advance Technology:
An entrepreneur should adopt advance technology for standardization of product with the less cost of production. By this way, entrepreneur gets improved advance technology, by adopting advanced plant, machinery, equipment etc.
7. Appreciation in Production and Productivity Level:
An entrepreneur can play a vital role in appreciating production and productivity level. To meet this purpose, entrepreneur establish project in Export Oriented Unit or Export Processing Zones or free Trade Zones (FTZ). Such units may be engaged in manufacturing, software development, horticulture, agriculture, aquaculture, animal husbandry etc.
EOU and EPZ are industrial estate where export oriented units are taken various incentive. If investment is done in 4 cases, govt. gives facility like less tax or no tax or rebate in tax 100% exemptions; and other facilities.
i. Export Oriented Units (EOU)
ii. Export Processing Zone (by Central Govt.)
iii. Special Economic Zone (SEZ)
iv. Trade Free Zone (TFZ)
Govt. provides the following facilities to above export oriented projects:
i. Single window system for paper formalities
ii. Raw material at cheaper price.
iii. Market and transportation facility
iv. Plant & Machinery
v. Credit facility
vi. Low rate of interest on loan
If there is an increase in production, employment and removing trade imbalances, govt. launches policies like EOU, EPZ and SEZ, then export promotion can be done.
8. Low Production Cost:
If entrepreneur exploit natural and human resource efficiently, it will give their return in high production at low cost instead of import at high rate and high cost of production.
9. Enhancing Foreign Competition Capacity:
If entrepreneur use the internal resources for production with sound quality, he can sell surplus out to other country and make a challenge in front of foreign nation at international level by sound, cheaper, durable and standard products.
10. Increasing Export:
Entrepreneurs are required to play an important role in export promotion. Export promotion reduces unfavourable balance of trade (i.e., only goods are included and services which are ignored or all visible items are included). It also increases valuable foreign currency reserves.
For motivation and increasing export promotion, govt. provides specific facilities and incentive to an entrepreneur. Both Central Govt. and State Government are provided concerned facility and incentives in the field of export promotion. There should be increasing number of old and new entrepreneurs lacking benefits of incentives, concessions and subsides. In this way Govt. has launched few programmes such as EOU, EPZ, FTZ, SEZ.
EOU — Export Oriented Unit
EPZ — Export Promotion Zone
FTZ — Free Trade Zone
SEZ — Special Economic Zone
11. Introduction to Industrial Culture and Corporate Service:
An Export Processing Zone (EPZ), free Trade Zones (FTZ), Special Economic Zone (SEZ) established by Central and State Govt. are industrial estates where export oriented units take various facilities such as tax exemptions, duty drawback, no import duties, no quantitative restrictions.
There are some important facilities provided to units in FTZ or EPZ:
i. Suitably developed plant and buildings.
ii. Single point clearance of new projects within 45-60 days.
iii. No license needed for import of capital goods etc.
iv. Duty free import of capital goods and equipment.
v. Complete exemption from income tax.
vi. Assured power supply.
vii. Export finance at confessional rate of interest.
viii. Market facilities
ix. Single window system for documentation formalities.
Export processing zones have been established at the following places:
i. Kandla free Trade Zone
ii. Santa Cruz Electronics Export Processing Zone.
iii. Export Processing Zone at Chennai.
iv. Export Processing Zone at Cochin.
v. Export Processing Zone at Noida (U.P.)
vi. Export Processing Zone at Falta (W .B.)
vii. Export Processing Zone at Vishakhapatnam (Andhra Pradesh).
At last but not the least, we conclude that an entrepreneur plays a vital role in export promotion and import substitution by establishing developing and expanding industries which can produce such goods which is easily used as import substitution.
Roles of an Entrepreneur – In Development of Special Economic Zones (SEZs)
India recognised early the effectiveness of the export processing zone (EPZ) model in promoting exports, with Asia’s first EPZ set up in Kandla in 1965. With a view to overcome the multiplicity of controls and clearances; absence of world-class infrastructure; and an unstable fiscal regime to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000.
SEZs in India functioned from 1 November 2000 to 9 February 2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made effective through the provisions of relevant statutes. The SEZ Act 2005, supported by SEZ Rules, came into effect on 10 February 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments.
The SEZ Rules provide for different minimum land requirements for different classes of SEZs. In addition to seven Central Government SEZs and 12 state/private-sector SEZs set up prior to the enactment of the SEZ Act 2005, formal approval has been accorded to 580 proposals out of which 374 SEZs have been notified. The performance of SEZs has been reasonably good despite some criticism.
Performance of SEZs in India:
SEZs are becoming increasingly important in India’s exports. The performance of SEZs is mainly examined in three areas, exports, employment and investment.
(i) Exports:
A total of 130 SEZs are already exporting. Out of this 75 are information technology (IT)/ IT enabled services (ITES), 16 multi-product and 39 other sector specific SEZs. The total number of units in these SEZs is 3046. The physical exports from the SEZs have increased by 128 per cent to 494.08 crore in 2013-14.
When the whole world including India was reeling under the effects of the global recession, growth in exports from SEZs was 128 per cent in 2009-10 compared to a paltry 0.7 per cent growth in total exports from India.
One of the criticisms SEZs face is that exports are mainly from the old SEZs which were formerly free trade zones (FTZs) and not from Greenfield SEZs. It is interesting to know that not only have many greenfield SEZs started exporting but also the exports of new SEZs, i.e. SEZs notified under the SEZ Act 2005, have grown rapidly over the years resulting in the highest share of 54 per cent for this category in 2013-14 compared to Central Government SEZs and State Government/private SEZs established prior to the SEZ Act 2005.
(ii) Employment:
Out of the total employment of 6,44,073 persons in SEZs, an incremental employment of 5,09,369 persons was generated after February 2006 when the SEZ Act came into force. At least double this number obtains indirect employment outside the SEZs as a result of the operations of SEZ units, his is in addition to the employment created by the developer for infrastructure activities.
(iii) Investment:
The total investment in SEZs till 31 December 2014 is approximately $2,14,871 crore including $1,96,972 crore in the newly notified zones. In SEZs 100 per cent FDI is allowed through automatic route. The Government’s role has been more as a facilitator by fast tracking the approvals rather than providing any direct monetary support. SEZs being set up under the SEZ Act 2005 are primarily private investment driven.
Problems before SEZ Programme:
Industrial units working under SEZ development programmes are facing following problems:
1. Land acquisition programme in 2008 created problems for the developers who started setting up SEZs. Demand was good and abundant capital available. So, there was a rush to set up SEZs as most developers hoped to attract sufficient clients. That turned out to be an over-estimation.
Singur and Nandigram erupted and reframed the debate on land acquisition. Till then, the government had been buying land for industry, often on the pretext of ‘public purpose’ and at sub-market prices, lending credence to the charge of SEZs being a ‘land play’. Amid mounting public backlash, the government stopped. Industry had to now negotiate with landowners and also pay market prices.
2. Due to global recession in 2008 and till today cash evaporated from the world economy, including India. Real estate prices tumbled and developers fell into a debt trap. They had no money to build, and with the apparent land arbitrage in SEZs gone, they had less reason to build one.
3. The draft of the Direct Tax Code (DTC), which was released in late 2009 has also created tax implications for the entrepreneurs working under SEZ Programme.
4. The budget 2014-15, shows that the commerce and finance ministries pulling in different directions. No income tax for SEZs became history. Finance Minister Mr. Jaitley, citing equal sharing of the corporate tax liability and foregone revenues of Rs.5,473 crore, slapped a 18.5% minimum alternative tax (MAT) on SEZs, he also levied a 15% tax on dividends declared. This has affected out cash flows of SEZ’s.
Role of an Entrepreneurs – In Forex Earning
The result of export promotion and import substitution is found in the increasing trend of foreign exchange earning if an entrepreneur produce maximum quantity of products and services. It is a sign of export promotion and production of substituted goods of imported goods and services.
Forex earnings (i.e. foreign exchange earnings) has been playing a prominent role in growth and development of any economy.
Forex earnings means arrival or introduction of foreign currency. For increasing the foreign earning the Govt. has launched LPG policy (Liberalization, Privatization and Globalization). Along with time to time industrial policy is also introduced and amended. To make the economy more competitive, increasing production, productivity and efficiency, an entrepreneur adopts ultra-modern technique and technologies.
The primary object of new industrial policy is to create confidence in the Indians and foreign industrialists. The main effect of our new industrial policy was the foreign currency reserves that reached at the record level of 120 billion dollars on 30th June 2004.
Sources of Forex Earnings:
The main sources of forex earning in India are as follows:
1. Rapid increase in our exports.
2. Heavy remittance of foreign currency by NRI for investment motive.
3. Entry of foreign entrepreneurs in large number in India with large foreign capital and latest technology.
4. Arrival to foreign capital in India (i.e. foreign direct investment)
5. Profit from industries which are established by Indian entrepreneurs in foreign country.
6. Indian employees who are involved in private and Govt. services in abroad.
Effect on Economy of Forex Earning:
1. Balance of Payment.
2. Reduction import.
3. Increasing export.
4. Introduction to foreign technology.
5. Advance technology based productivity.
6. Rising trend of production and productivity.
7. Low cost of production and control on price level.
8. Industrial Development.
9. Control on Monopolies Restrictive Trade Practices.
10. Increasing competitive Tendency.