Pradhan Mantri Mudra Yojana: Credit saturation for livelihoods

Source: The post is based on the article “Pradhan Mantri Mudra Yojana: Credit saturation for livelihoods” published in Live Mint on 10^th April 2023.

Syllabus: GS 2 – Government Policies & Interventions in Various Sectors

Relevance: About Pradhan Mantri Mudra Yojana

News: Pradhan Mantri Mudra Yojana (PMMY) has completed eight years. The article analyzes the scheme and provides its achievements.

About Pradhan Mantri Mudra Yojana (PMMY)

It is one of the flagship schemes of the Union government to encourage self- employment. The scheme targets micro and own-account enterprises that are mostly engaged in manufacturing, processing, trading and services.

These units were largely self-financed or relied on moneylenders because the country’s formal architecture was unable to reach out to them and meet their financial requirements.

Hence, the PMMY was launched to bridge the gap between a large unbanked sector and formal lenders.

The scope of the scheme has widened with the time. For example, initially it covered income-generating activity only in the sectors of manufacturing, trading and services.

However, since 2016-17, activities allied with agriculture and their support services promoting livelihoods have been brought under its ambit.

Read More: Reserve Bank flags rising bad assets from Mudra loans

What has been the social impact of PMMY?

On Social Groups: The PMMY has benefitted all segments of Indian society such as General, SC/STs and OBCs. There has been an increase in the participation of OBCs and SCs in availing the loans.

On Women: The scheme has given impetus to women’s entrepreneurship. Disbursements to women entrepreneurs registered an average growth of 23% in the scheme’s first four years. In 2022, it surpassed its pre-covid level, registering a robust growth of 28%.

On Minority Communities: The scheme has been able to cater to the requirements of minorities. Loans to members of minority groups touched an all-time high in 2022, with their overall share at 10%. Shishu and Kishore loans accounted for 85% of total cumulative disbursement.

How has the scheme performed across different states?

One of the objectives of India’s growth policy has been to bridge the divide between the thriving western and lagging eastern parts of the country. As per a report, there has been a significant dispersion of the loan amount across states.

For example, states such as Uttar Pradesh, Odisha and Bihar have recorded all-round gains from the PMMY. West Bengal and Tripura have also seen a rise in their total share, indicating an eastward flow of beneficiaries.

Developed regions such as the national capital region, Maharashtra, Karnataka and Goa have seen their shares decline, even though they dominate the scheme in absolute terms.

What has been the overall performance of PMMY?

As per a survey, the scheme had helped in generating 11.2 million net additional jobs during the period 2015 to 2018.

Data as on 24 March 2023 puts the scheme’s cumulative disburse amount at ₹22.65 trillion. The share of Shishu loans is the highest, at 40%, suggesting that the PMMY has largely supported first-time entrepreneurs.

What can be the way ahead?

It is crucial that PMMY reap the benefits of 5G technology and e-commerce with popularization of Mudra cards.

Encouraging the registration and formalization of own-account enterprises could be another way of taking this scheme to new levels.

Source: Mint