Dalit Entrepreneurship

Stand Up India is expected to benefit 125,000 SC/ST entrepreneurs over the next three years. These
numbers, though, are pale in comparison to the Dalit population of 300 million, 65 per cent, or about
198.6 million, of whom are believed to be in the age group of 18-35, according to the Dalit Indian
Chamber of Commerce & Industry (Dicci).P S Krishnan, former secretary in the Ministry of Welfare and
currently advisor to Government of Telangana, says there has never been a "systematic study" of SC
entrepreneurs. "The general impression is that SC entrepreneurship is growing, but it still is minuscule,"
he said. Krishnan says SC entrepreneurs continue to face discrimination, particularly those who want get
into the business of food. "Moreover, entrepreneurial quality is a result of a network of existing
entrepreneurs, which Dalits lack. Hence, they need much more hand holding. In any case, a vast majority
of SCs live in rural areas and are landless agricultural labourers. So, while the increase in Dalit
entrepreneurship is welcome, it isn't a complete solution," he says. Recently, Devesh Kapur, director,
Center for the Advanced Study of India, University of Pennsylvania, conducted a survey of the top 1,000
Dalit entrepreneurs in the country. Although the findings are yet to be made public, sources said all
1,000 entrepreneurs, products of the post-reform period, were together worth about Rs 15,000 crore.

This is roughly the amount of capital raised by companies in a not-so-great year through initial public
offerings, and is just a minuscule fraction of the Rs 96.75 lakh crore that the 1,300 NSE-listed companies
are worth. Even this presents an exaggerated view of the community's economic prospects. Journalist
Chandrabhan Prasad, who has co-authored a book Defying the Odds with Kapur, said: "These
entrepreneurs do not represent the larger Dalit reality. But the rise of Dalit enterprise is a new narrative
that we must watch. "The survey found that most of these entrepreneurs are in the manufacturing
sector, supplying parts to Tata Motors, Honda's and Bajaj's motorcycles. The Tata group companies and
Pune-based Forge Marshall use services of over 100 welding companies owned by Dalits. Milind Kamble,
chairman of Dicci said, there would be about 8.7 million Dalit enterprises in the country. "From 1.5
million in 2001, the number has grown significantly," Kamble added. Dicci's calculation was based on
numbers given by Union Finance Minister Arun Jaitley in his previous Budget, where he said there were
about 57.7 million micro, small and medium enterprises (MSMEs) in the country, of which 62 per cent
belonged to SC, ST and OBC entrepreneurs. While anecdotal evidence often tends to paint a rosy
picture, the share of SC/ST entrepreneurs hovers around 15 per cent, according to Kamble. According to
the third All India MSME Census in 2001-02, there were 1.5 million enterprises floated by SC and ST
businessmen. This accounted for about 15 per cent of the 10.52 million enterprises that were
operational at that time.In the fourth census (2006-07), the number grew to 4.9 million, but their share
fell to about 13.6 per cent of 36 million enterprises in the country. Between the third and fourth census,
the number of ST businesses grew at a faster pace than SC entrepreneurs. The fifth census is currently
being conducted. At a broader level, the economic prospects of the community seem to be improving. A
2013 Columbia University study by Arvind Panagriya and Vishal More on 'Poverty by Social, Religious &
Economic Groups in India and its Largest States 1993-94 to 2011-12' said, "The first and foremost point
to make is that the level of the SC poverty in 2011-12 has shown a strong tendency to converge toward
the poverty rate prevailing across all groups. At India-wide level, the rural poverty rate for the SC at 31.5
per cent in 2011-12 is now less than six percentage points away from the poverty rate of 25.4 per cent
for all groups. The percentage point gap in 2004-05 was twice of this gap."
About 2.5 lakh scheduled caste (SC) and scheduled tribe (ST) entrepreneurs would be created under the
Centre's 'Stand Up India' initiative, Union Minister for Micro, Small & Medium Enterprises
(MSMEs) Kalraj Mishra has said. "Under Stand-up India initiative, each of the 1.25 lakh bank branches
would be encouraged to fund a SC/ST and woman entrepreneurs to create 2.5 lakh new entrepreneurs
in the country," Mishra said at the inauguration of the fifth National Industrial & Trade Fair organised
by Dalit Indian Chamber Commerce & Industry (DICCI) here today.There would be a special support
structure for innovation based start-ups, including funding from the government."The government will
unveil a blue print for start-ups to ease the process of setting up new venture very shortly," he
said.Mishra observed that availability of adequate credit was always a major issue and his ministry has
taken several initiatives to address the challenges."The ministry is implementing major schemes like
Prime Minister Employment Generation Programme (PMEGP), a credit-linked subsidy programme for
creation of employment in both rural and urban area of the country. PMEGP is providing relaxation
to SC/ST beneficiaries," the minister said."For urban SC/ST beneficiaries, margin money subsidy is
provided at 25% of the project cost while it is 35% in rural areas," he added.The minister also said
that DICCI has been encouraging and facilitating Dalit enterprise as a means of empowerment and also
ensuring that the community contributes in the economy, and be the "job givers, not job seekers".On
the occasion, Minister for Heavy Industries Anant Geete said that there is a promising road ahead
for Dalit entrepreneurs."As many as 292 PSUs (public sector enterprises) in India have been mandated
to procure 20% of their requirements from MSME sector.
Of this, 4% has to be from Dalit enterprises, which translates into a sizable market" he said.Earlier, Chief
Minister Devendra Fadnavis inaugurated the Trade Fair and stressed on the need of empowerment
of SC/ST entrepreneurs.The fair has 350 stalls, including 30 stalls belonging to the central PSUs.
Seminars on MSE procurement policy, business-to-business meetings, buyer-seller meetings are being
organised on themes important for entrepreneurs, in addition to programmes designed to promote
business opportunities and capacity-building.

Prime Minister Narendra Modi gave a stirring speech at a meeting of the Dalit Indian Chambers of

Commerce and Industry (DICCI) on Tuesday, but several Dalit entrepreneurs who were present said they
would like to see more action on the ground by government to foster the Dalit entrepreneurial
spirit.DICCI was formed as a parallel body to industry and trade pressure groups such as the
Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry
(Ficci) because Dalit entrepreneurs saw these groups as old boys' clubs where everyone knew everyone
and helped each other, but were unable to appreciate the special handicaps that weighed down the
socially disempowered. The idea of a venture capital (VC) fund only for Dalits was floated by DICCI and
was seized upon enthusiastically by the then deputy chairman of Planning Commission, Montek Singh
Ahluwalia, who took a personal interest in the architecture of the fund. It was announced amid great
fanfare by the United Progressive Alliance (UPA) in 2012 as a way to financing the expansion and
modernisation of Dalit-run businesses and funding prospective Dalit entrepreneurs.The original idea was
to replace the existing schemes for scheduled castes (SC) and tribes, where the state has been the giver
and the community the recipient. Via the VC fund, the state was envisaged as becoming a partner by
buying stake in Dalit-owned companies and having a share in the profits, too.However, that did not
really take off. Instead, finance minister P Chidambaram in his interim Budget 2014-15 speech
announced Rs 200 crore for a Venture Capital Fund for Scheduled Castes (VCF-SC), that IFCI would run.
His successor, Arun Jaitley reconfirmed this outlay in his Budget, adding Rs 100 crore to be launched
through the Vanbandhu scheme.However, in its latest progress report dated December 2015, IFCI says it
has sanctioned only Rs 104 crore and has disbursed only Rs 32.13 crore to 10 beneficiaries.It hasn't been
for want of trying. IFCI has held camps, workshops and public events all over India to offer investment,
every month in 2015, sometimes twice a month. But, no one seems to be attracted to the
product.There's a reason. Dalits have many avenues they can tap for loans: public sector banks,
the National Scheduled Caste Finance and Development Corporation (NSCFDC), the state governments…
Banks give a loan at an interest rate of 11 per cent with a subsidy element and in many cases, bank
managers know the individuals and their business so there is the added know-your-customer comfort. In
many states such as Gujarat, for instance, Dalits get a highly subsidised loan from the state government
where the interest with the subsidy works out to two or three per cent and the state government bears
the risk; and although no Dalit entrepreneur has ever got the full Rs 30 lakh that the NSCFDC is supposed
to give for a start-up business, for many it is a beginning.The IFCI scheme offers no subsidy because it is
a VC fund; and it works as a loan-giving authority because it is not a VC Fund. The interest it charges is
10 per cent, which is the same for everyone, SC or not. "To save one per cent, why should a Dalit
entrepreneur go to IFCI, travel all the way to Delhi and chase officials? At least the local bank knows you,
it processes your papers in one month and gives you a subsidy. But the IFCI fund doesn't do anything for
our particular needs," said N K Chandan of DICCI, who availed a loan from the IFCI venture fund. The
total amount he was disbursed for Chandan and Chandan Industries Pvt Ltd, a small unit that needed
money to expand its operations to manufacture plastic metre cover and junction boxes was Rs 2.1 crore.
Of this, Rs 2.09 crore was a loan. The rest was from the VCF.The IFCI also runs a credit guarantees
scheme where banks are supposed to provide 75 per cent credit.

Some Dalit businessmen plan to launch a Rs 500 crore venture capital fund — India’s first community-
focused fund.

The Central government’s new procurement policy will open business

opportunities worth Rs 7,000 crore for Dalit and s (ST) entrepreneurs.
These entrepreneurs are now gearing up to tap this opportunity by
launching their own venture capital fund and increasing their production
capacities.

The proposed Rs 500 crore venture capital fund will be the country’s first
community-focused fund, according to industry representatives. It will
help entrepreneurs from the community, from whom financial
institutions are shying away, said a senior official.

Milind Kamble, chairman, Dalit Indian Chamber of Commerce and Industry (DICCI), said that the
association has approached the market regulator, the Securities and Exchange Board of India (Sebi), with
the proposal. The fund will be launched through a special purpose vehicle.

“The first round of funding will be from domestic investors and businessmen from the community and
during the second round we will look at international investors,” said Kamble.

Under the recently announced Public Procur-ement Policy for Micro and Small Enterprises (MSE), a
minimum of 20 per cent of total annual purchases of Central ministries, departments and public sector
undertakings (PSUs) has been reserved for procurement from MSEs.

Of the 20 per cent share of annual procurement from MSEs, a share of four per cent (or 20 per cent of
20 per cent) has been reserved for procurement from MSEs owned by Dalit and ST entrepreneurs.

To enhance the participation of Dalits and ST in government procurement, all Central ministries,
departments and PSUs will have to organise special vendor development programmes and buyer-seller
meets. They will have also to report their targets and achievements with respect to procurement from
MSEs in their annual reports.

Ministries, departments and PSUs which do not meet the mandatory goal of the public procurement
policy will be required to provide reasons to a review committee headed by the secretary to
the MSME ministry.

However, the ministry of defence, on account of its unique nature, had reservations about
implementation of the procurement policy for MSEs. Keeping this in view, defence armaments and
weapons systems have been kept out of the purview of the policy.

Kamble of DICCI said that every year the government procures products and services worth Rs 1.75 lakh
crore. Four per cent of this, amounting to some Rs 7,000 crore, will be reserved for the Dalit and ST
entrepreneurs.

“We are happy, since we now know there is an assured market.

With this we can now go in for expansion and other new initiatives,” said Kamble. Entrepreneurs from
the community are already suppliers to big brands such as Tata, Bajaj, Hero Honda and Kirloskar, among
others.

Besides, there are also successful businessmen from this community, who include Ashok Khade,
chairman of Das Offshore Pvt Ltd, who presides over a Rs 550 crore business empire; Natha Ram, who
runs Steelmont Pvt Ltd, a Rs 600 crore company that makes steel converter machines; Devjibhai
Makwana, whose Rs 300 crore company, Suraj Filament, makes flat and twisted high-tenacity
polypropylene multi-filament yarns.

The Dalit population in the country is estimated at 200 million, or one-sixth of India's population, of

which 15 per cent are entrepreneurs, said Kamble. However, according to him, they control only one per
cent of the country’s wealth.

“Our community members want to grow, but cannot find anyone to lend them money to start a unit,”
he said. Being a Dalit means virtually no assets, so people from the community end up going to private
lenders. Credit facilities to start a business are hard to come by for the community, he added.

“Trade and enterprise have never been part of our tradition. The only trade traditionally linked with
Dalits is leather work,” he noted. Dalits need support in terms of training, identifying the market and
financial help, which DICCI provides, he added.

There are no problems that are peculiar to the Dalits once they get to the market. “But reaching there is
a problem, given that they are educationally and economically backward.” To address this
lacuna, DICCI counsels entrepreneurs, provides them with support, and identifies markets for them.