Opinion

Mudra Yojana, the most transformative socio-economic reform in India’s history!

Prime Minister Narendra Modi has repeatedly said that the true potential of India lies in the villages and in small entrepreneurs. Unfortunately, for decades both these aspects have been ignored by consecutive governments leading to sluggish growth.

It is Prime Minister Modi who’s given focused impetus to both these aspects, especially the small entrepreneurs in the country who are tens of millions in number.

Mudra Yojana, which was launched by the Prime Minister himself in 2015, has brought about visible and drastic change in the lives of millions of small entrepreneurs.

One such entrepreneur, Shiv Lal, has availed loan under the Mudra Yojana and thanks the Prime Minister for the scheme –

Shiv Lal went from house to house repairing furniture for 22 years. But times have changed, so have his fortunes. Today, he has people working under him who do the same job he’d been doing for more than two decades.

He thanks the Narendra Modi government for this drastic change. He took a 2 lakh rupees loan under the Mudra Yojana at an interest rate of about 5%.

He says that he’ll look to expand the business further by investing more in the future. Since taking the loan and investing it in the business, Shiv Lal’s clients have doubled and his income stream has become much more consistent.

It wasn’t as if he didn’t attempt to obtain a loan before; he approached private lenders but they didn’t show interest in giving him a loan.

He goes on to say that the loan under the Mudra Scheme is an easy one; the interest payment is well within his reach. He’s even contemplating of taking further loan to expand the business as profits will come.

Watch –

Performance of the Mudra Yojana

During the financial year 2015-16, over 3.48 crore loans were sanctioned with a disbursement of 1.32 lakh crore rupees.

During 2016-17, over 3.97 crore loans were sanctioned with a disbursement of 1.75 lakh crore rupees.

Since the inception of the scheme till the 31st of March 2017, over 7.45 crore loans have been sanctioned.

Impact

The opposition is vociferously talking about the slow rate of job creation, but unfortunately for them, they’re barking up the wrong tree. Other than the massive investments taking place in the country both domestically and through FDI channels, the Mudra Yojana has given an unparalleled thrust to job creation.

Look at it this way –

7.45 crore loans have been taken by small entrepreneurs to invest in their businesses, just like Shiv Lal did. He now employs three people under him. Now let’s assume that employing three people is an extreme scenario and not every loan-recipient would be able to do so.

So, if we take a very conservative approach and assume that half of the loan takers employ two additional workers and the rest employ just one more person. This simple calculation means that the Mudra Yojana, has at the very least, added close to 11.2 crore blue-collared jobs in the last two years!

This figure won’t be found in government documents as there is no way to accurately estimate or survey it. But only simple logic is needed to reach such a figure.

For small entrepreneurs, an investment of one or two lakh rupees is massive, and essentially means doubling or a manifold increase in business. To manage the sudden expansion, every entrepreneur would need to employ more people, and this has led to an unprecedented rise in employment.

It is clear from Shiv Lal’s example that entrepreneurs like him look for loans, but private lenders or banks in their own capacity don’t entertain them because of their weak credit worthiness. If they can’t get loans from these entities, they approach individual lenders who charge exorbitant interest rates. Non-availability of cheap loans means stagnant or even deteriorating business as more people enter the trade or the financially able ones expand theirs.

The Mudra Yojana has effectively nullified this problem. It has virtually finished the problem that visionary entrepreneurs have of a lack of capital to invest. Most of them don’t save enough to make considerable investments in their business, and hence, they are never able to grow. Taking loans is the only available option for them which has now been enabled under the Mudra Yojana.

This has a wide-ranging social impact as well. Earlier any scheme similar to this would give loans to minorities or segments of the society whom the ruling party viewed as potential vote-banks. But even then, only a few would get loans while the ones who actually needed and deserved never got any help from the government.

This has changed. Loans are given under the Mudra Yojana without any consideration for caste, religion, or sex. Anyone who applies and is eligible gets a loan. This means that social disparity along with economic disparity is being reduced.

Already in the two months in the current financial year, the government has given over 46 lakh loans with a disbursement of over 21 thousand crore rupees.

This scheme is working magic on the ground and is transforming the lives of the poor in a manner only they can understand. Repeated state elections have shown that Narendra Modi’s popularity is still on the rise, and it’s because of schemes like these that this is happening.


Vinayak Jain

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