About 16 months ago, people of India gave a massive mandate to prime minister N Modi on two major planks viz., (i) eliminating the scourge of corruption and (ii) fulfilling the aspirations of a mammoth 800 million people below 35 years. From the day one of taking charge, he has been working relentlessly to deliver on both the promises. For the first, he is cleaning up the governance systems whereas for second, he has fired all cylinders to propel “inclusive” development.
The flagship “Make in India” mission started by Modi last year seeks to transform India in to a manufacturing hub of the world and increase the share of manufacturing in GDP [gross domestic product] from present around15% to 25% by 2025. When, viewed in conjunction with “Skill India” [another major initiative also launched last year to impart skill and training to predominantly “unskilled” labour force and thus, make them employable], an overarching objective behind this mission is to create jobs.
Every year, over 10 million youth enter the job market. Given the sheer scale, it is impossible to absorb them in industries alone despite achieving the target growth in manufacturing which by itself is a challenging task. And, given that agriculture – single largest employer – has its inherent limits [due to low yields and income], the government has also thought through the idea of enabling the youth to become “self-employed”.
Modi has always believed in the inherent potential of every individual – irrespective of his background, social strata he belongs to and his education – and would like to give him full opportunity to exploit it by pursuing a profession of his choice. There could not be anything more apt than enabling him stand up on his own feet and earn a decent income. This way, he should be able to provide employment to others as well.
Not until Modi [hailing from a backward class and one amongst millions of the poor] emerged to challenge the established order and alter Indian’s socio-economic discourse, vegetable vendors, small shop-keepers, women associated with Beauty Parlours & Boutiques, Mechanics, Electricians, Plumbers and host of others engaged in tiny activities were considered as mere appendages to highly sophisticated professions [CAs, engineers, doctors, bankers, corporate etc]. They never got what they deserved.
Yet, the present prime minister is different. He views them all as respectable professions; indeed, he sees them as “potential entrepreneurs” and has bowed to provide all the support viz., financial, technological, managerial, marketing etc needed to lift them from their current pathetic state. To gauge as to where they stand right now and magnitude of effort required to catapult them to economically viable enterprises, let us look at some hard facts.
There are about 57 million such entrepreneurs in the un-organized sector who are responsible for creating 110 million jobs [that is a little less than 50% of an estimated 240 million households in India]. They are mostly at the bottom of the economic structure and are largely unfunded sections of the society. They are dependent on money lenders for loans on an exploitative rate of interest [24%-36%]. Neither agriculture, nor industries and nor services are strong and resilient enough to absorb them. This presents a huge challenge but a big opportunity as well.
To tap this, early this year, Modi had announced the Micro Units Development and Refinance Agency [MUDRA] primarily to extend institutional finance support to these potential entrepreneurs. The scheme – also known as Mudra Yojna – has now been launched. There are 120 partners in it, which include public sector banks [PSBs], private sector commercial banks [PSCBs], regional rural banks [RRBs], Non-bank finance companies [NBFC] and micro-finance institutions [MFIs] etc.
During the current financial year 2015-16, a total of Rs 122,000 crores loans will be given to these groups who have so far been denied access to formal sources of finance. The loans will be provided under three broad categories viz., Shishu – up to Rs 50,000/-; Kishore – Rs 500,000/- and Tarun – Rs 1000,000/-. Under this Yojna which will continue for next few years, there will be 60 million target beneficiaries who will be developed in to India’s small entrepreneurs.
They will all be issued Debit Cards, which will allow them withdrawal of money through the ATMs. Since, these people cannot afford securities and hence the requirement of furnishing securities will not be applicable to loans given to them. These loans will not be given on the strength of personal or political connections but linked to the business proposals of these potential entrepreneurs.
According to finance minister, Arun Jaitely, already Rs 24,000 crores loans have been distributed to a total of 3.7 million beneficiaries at present. By the end of this year, the number of beneficiaries is expected to cross 15 million. This number will increase year after year.
Last year in August, Modi had launched the Jan Dhan Yojna [JDY] to create a versatile platform for financial empowerment of the people and ensure their participation in the economic mainstream. This has been an unprecedented success with a record 180 million accounts opened under it. A much bigger accomplishment [very few had anticipated] is that people have deposited an aggregate of around Rs 30,000 crores in these accounts; millions of these depositors are from low income groups.
It goes without saying that the target beneficiaries under MUDRA Yojna are already well grounded on JDY platform and would be able to effectively utilize the loans and other facilities under the former. In essence, the JDY-MUDRA duo will provide the much needed bull work for metamorphosing the millions of hitherto vulnerable [and much neglected] groups to emerge as an independent economically powerful force.
Any apprehension that directing banks to lend to weaker sections could affect their financial viability is without any valid basis. This is because past experience of MFIs giving loans to small enterprises shows that there is minimal risk of default from these sections [this is also very much in sync with conventional wisdom that a small borrower rarely default in repayments whereas, such risk is much greater in case of large borrowers].
In sum, MUDRA Yojna is yet another great idea coming out from the stable of the prime minister to create income earning opportunities for the millions of vulnerable people who have for generations lived on the fringes of economic mainstream. To use the words of Arun Jaitely, this could be a game changer in carrying forward the ‘inclusive’ development agenda.