Mudra Loans: Modi Govt's Flagship Scheme In Questions After Rising NPAs, Failure To Generate Employment

The government introduced the Pradhan Mantri Mudra Yojana scheme in 2015 with an aim towards turning youth into entrepreneurs. The plan was to create a business environment across the country and keep a check on unemployment.

But recent media reports on one of the flagship schemes of the Modi government has raised serious concerns. The move has not only burdened the banks with lakhs of loans to manage and recover but also has failed to generate a significant number of jobs.

What Is Mudra Yojana?

Through Mudra Yojana MSMEs, small farmers, and non-corporates can take a loan up to Rs 10 lakh.

Around 13 crore Mudra loans were distributed in three categories, Shishu, Kishor, and Tarun depending on the amount. The Shishu category extends up to Rs 50000, while the Kishore category extends up to Rs 5 lakh and Rs 10 lakh respectively.

About 45 per cent of the Mudra loans was from Shishu category as of March 2019. These loans come with low collateral and the total amount borrowed under it stood at 1.4 lakh crore.

The Kishore loans contributed 32 per cent of the Mudra Loans and stood at Rs 99,868 crore, while 23 per cent loans were disbursed under Tarun category loans which amounted to Rs 72000 crore.

Mudra NPAs

The government in Parliament had said that the total NPAs under Mudra loans summed up to Rs 176541.78 crores as of March 2019, which is a 10,000 crore increase from March 2018 when the NPAs stood at Rs 7277.32 crore.

The NPAs for Shishu category which has the most amount of loans are consistently declining from 4.14 per cent in 2016 to 1.93 per cent in 2017-18 and 1.29 per cent in 2018-19. This indicates that most of the NPAs are under the Kishore and Tarun category.

The Reserve bank of India had warned the government on Mudra loans becoming NPAs even though the figures are not worrying yet.

Failure In Job Generation

According to the Labour Bureau’s Draft report on Pradhan Mantri Mudra Yojana Survey conducted recently, 1.12 crore additional jobs were created during the first 33 months following the rollout of the scheme. Of this, 51.06 lakhs were self-employed while 60.94 lakh were employees or hired workers.

Now, if we compare the number of jobs created to the loans disbursed, only 10 per cent of the jobs were created.

Most of the jobs were created under the Shishu category, which has the least number of NPAs. As per the data, Shishu loans accounted for 66 per cent of the new jobs created while Kishor and Tarun accounted for 18.85 per cent and 15.51 per cent new jobs each.

As per the Indian Express report, the survey is said to be the government’s attempt to counter the National Sample Survey Office (NSSO) report on unemployment which estimated the unemployment rate to be 6.1 per cent in 2017-18. The NSSO report was ready in December 2018 but was released after Lok Sabha elections on May 31, 2019.

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