"An entrepreneur diversifies the economic activities, across the geographic, sectoral and technological scope".

Identify the function of entrepreneur in relation to economic development given in the above statement.

Increasing the spectrum and scope of economic activities

The correct answer is Option (3) → Increasing the spectrum and scope of economic activities.

Increasing the spectrum and scope of economic activities is the function of entrepreneur in relation to economic development in the given statement.

Increasing the Spectrum and Scope of Economic Activities: Development does not merely mean ‘more’ and ‘better’ of the existing, it also and more crucially means diversification of economic activities– across the geographic, sectoral and technological scope. We are aware that underdeveloped countries are caught in the vicious cycles on the demand as well as supply side. Entrepreneurs penetrate into and break these cycles, for example, by organising and orienting domestic production for exports. Thus, production (and thereby generation of income) is not constrained by the inadequacy of domestic demand. (Demand-side Vicious Cycle). In today’s context, we are aware that India is poised to become a manufacturing hub for the global markets for diverse products. Economic development is also constrained by the supply-side pressures resulting into absence of capacity to meet the demand whether domestic or overseas. Entrepreneurs mobilise local and even overseas resources to augment the productive capacity of a country. Indian Multinational Giants is fast becoming a reality. Entrepreneurs lead the process of economic development via bringing about sectoral change. You must be aware that as the economies grow, percentage of GDP originating from agriculture decreases and that originating in industry and services sectors goes up. Entrepreneurs through their decisions to divest from the stale sectors and invest in green-field sectors bring about a virtual transformation of the economy from ‘underdeveloped’ to an ‘emerging’ and ‘developed’ status.

OTHER OPTIONS

• Contribution to GDP: Increase in the Gross Domestic Product or GDP is the most common definition of economic development. We are aware that income is generated in the process of production. So, entrepreneurs generate income via organisation of production be it agriculture, manufacturing or services. We are also aware that income generated is distributed among the factors of production where land gets rent, labour gets wages and salaries, capital gets interest and the residual income accrues to the entrepreneur in the form of profits. As rent and interest accrue to those few who have land and capital respectively whereas larger masses are destined to earn their incomes via wage employment, the biggest contribution of the entrepreneurship lies in capital formation and generation of employment. This is what we turn our attention to.

• Generation of Employment: Every new business is a source of employment to people with different abilities, skills and qualifications. As such entrepreneurship becomes a source of livelihood to those who do neither have capital to earn interest on nor have the land to earn rent . In fact, what they earn is not only a livelihood or means of sustenance but also a lifestyle for themselves and their families as well as personal job satisfaction. As such entrepreneurs touch the lives of many, directly as well as indirectly.

• Generation of Business Opportunities for Others: Every new business creates opportunities for the suppliers of inputs (this is referred to as backward linkages) and the marketers of the output (what is referred to as forward linkages). As a pen manufacturer you would create opportunities for refill manufacturers as well as wholesalers and retailers of stationery products. These immediate linkages induce further linkages. For example greater opportunities for refill manufacturers would mean expansion of business for ink manufacturers. In general, there are greater opportunities for transporters, advertisers, and, so on. So, via a chain-reaction, entrepreneurship provides a spur to the level of economic activity.