With formal jobs scarce in India, hopes have been pinned on the government’s Mudra loan scheme, launched in 2015 to generate self-employment among those of modest means. A survey on the scheme conducted by the Labour Bureau, as reported in The Indian Express, has revealed that only a fifth of all beneficiaries surveyed took loans to start new businesses, while the rest used the money to expand existing operations. The survey covered the first 33 months of the scheme’s rollout.
That proportion may sound low, and may even suggest a failure of the scheme, but it’s best not to jump to that conclusion. It is quite enough that Mudra loans aid small businesses with credit. Given this aim, it was always expected that existing entrepreneurs would avail of the facility in larger numbers. Many of these were in the informal sector, and the scheme has helped their formalization. The default rate on such loans is no cause for alarm either. As of March 2019, just under 2.7% of advances had officially been termed “non-performing". Mudra, in general, has been a success.
But whether Mudra is generating enough jobs remains a big question. The Labour Bureau survey found a net addition of 11.2 million jobs in the 33 months that it covered, while 155.6 million loans were disbursed. Most loans, it appears, have been used either for personal expenses, which is a problem, or for single-person business units (say, a pushcart retailer or streetside snacks vendor), which is only to be expected, since solo operations offer livelihood to millions. They are entrepreneurs every bit as much as those who sit in airconditioned offices and hire others.