Solution:

The entrepreneur is the key to the creation of new enterprises that energise the economy and rejuvenate the established enterprises that make up the economic structure.

Entrepreneurs initiate and sustain the process of economic development in the following ways :

(1). Capital formation :

• Entrepreneurs mobilise the idle savings of the public through the issues of industrial securities.

• Investment of public savings in industry results in productive utilisation of national resources.

• Rate of capital formation increases which is essential for rapid economic growth. Thus, an entrepreneur is the creator of wealth.

(2). Improvement in per capita income :

• Entrepreneurs locate and exploit opportunities. They convert the talent and idle resources like land, labour and capital into national income and wealth in the form of goods and services.

• They help to increase net national product and per capita income in the country, which are important yardsticks for measuring economic growth.

(3). Improvement in living standards :

• Entrepreneurs set up industries which remove scarcity of essential commodities and introduce new products.

• Production of goods on mass scale and manufacture of handicrafts, etc., in the small scale sector help to improve the standard of life of a common man.

• These offer goods at lower costs and increase variety in consumption.

(4). Economic independence :

• Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture indigenous substitutes of hitherto imported products thereby reducing dependence on foreign countries.

• Businessmen also export goods and services on a large scale and thereby earn the scarce foreign exchange for the country.

• Such import substitution and export promotion help to ensure the economic independence of the country without which political independence has little meaning.

(5). Backward and forward linkages:

• An entrepreneur initiates change which has a chain reaction. Setting up of an enterprise has several backward and forward linkages.

• For example, the establishment of a steel plant generates several ancillary units and expands the demand for iron ore, coal, etc. These are backward linkages.

• By increasing the supply of steel, the plant facilitates the growth of machine building, tube making, utensil manufacturing and such other units.

• Entrepreneurs create an atmosphere of enthusiasm and convey a sense of purpose. They give an organisation its momentum. Entrepreneurial behaviour is critical to the long term vitality of every economy.

• The practice of entrepreneurship is an important to established firms as it is to new ones.

(6). Generation of Employment :

• At the beginning of seventh five year plan the backlog of unemployment was estimated to be around 44 million persons.

• Emphasis on modernisation which usually results in automation, use of high technology, and technology up gradation initiated during 1980s and structural changes introduced by the Government during 1990’s are likely to give much rise to capital-intensive rather than labour intensive industry.

• It is feared that there will be very little additional job opportunities within the fold of organised public and private sectors.

• Entrepreneurship development training which helps in strengthening informal and unorganised sector is expected to motivate enterprising people to opt for self employment and entrepreneurial career.

• It will therefore, help in solving the problem of increasing unemployment to some extent.

(7). Harnessing Locally Available Resources and Entrepreneurship :

• India is considered to be very rich in natural resources. In spite of about five decades of planned development a large number of states have remained economically backward.

• A few large scale industries started by entrepreneurs from outside the state in an economically backward areas may help as model of pioneering efforts, but ultimately the real strength of industrialisation in backward areas depend upon the involvement of local entrepreneurship in such activities Increased activities of local entrepreneurs will also result in making.

(8). Balanced Regional Growth :

• Medium and large scale industries can only be started with huge investment which is either available with well established industrial houses or need to be drawn from public exchequer.

• Also, promotion of such industries does not help in reducing disparities of income and wealth.

• On the other hand, an important advantage of small scale enterprises is that they can be started with meager financial ‘resources and little or no previous experience or entrepreneurial background.

(9). Reducing Unrest and Social Tension Amongst Youth :

• Many problems associated with youth unrest and social tension are rightly considered to be due to youth not being engaged in productive work.

• In the changing environment where we are faced with the problem of recession in wage employment opportunities, alternative to wage career is the only viable option.

• The country is required to divert the youth with latent entrepreneurial traits from wage career to self-employment career. Such alternate path through entrepreneurship could help the country in defusing social tension and unrest amongst youth.

(10). Innovations in Enterprises :

• Business enterprises need to be innovative for their survival and better performance. It is believed that smaller firms have relatively higher necessity and capability to innovate.

• The smaller firms do not face the constraints imposed by large investment in existing technology. Thus they are both free and compelled to innovate.

• The National Science Foundation, an organisation in USA found that small companies produce four time more innovations per research dollar than do bigger companies.

• Entrepreneurship development programmes are aimed at accelerating the pace of small firms growth in India.

• Increased number of small firms is expected to result in more innovations and make the Indian industry compete in international market.