MUDRA Scheme is Encouraging Self Employment

Prime minister Narendra Modi came to power promising to create 10 million jobs per year. However, jobs in formal sectors like manufacturing, trade, construction, education, health, information technology, transport, and accommodation and restaurant has actually not been very successful. Report suggest that job growth The total number of jobs created in the first three years of the BJP government would be 1.51 million–which is nearly 39% less than the 2.47 million jobs created during the three previous years.

It is true that government has not been successful in creating jobs in formal sector. Given more than 70% of jobs come from private sector, government may not have much control over job creation in private sector. According to estimates, big corporates in formal sector employs around 12.5 million people. Whereas, micro small medium enter prises (MSME) employee 125 million people.

Government has started to work at the bottom of job pyramid by trying to strengthen MSME sector through MUDRA (micro units development and regeneration agency). MUDRA scheme is a program where government gives loan in three categories sishu or small (upto 50000 rupees), kishore or medium (upto 5 lac rupees) and tarun or big (upto 10 lac rupees) to people who want to start their own business or expand their existing business. Almost 90% of loans were given in the small category in 2015 – 16 and 2016-17. Two crore new entrepreneurs, and 5.6 crore women entrepreneurs have availed loan. If new entrepreneurs and women entrepreneurs are combined we get the number of 7.6 crore people who were give a loan to start a business.

2015 – 16 2016 – 17 Total
Money Disbursed (Crores) 132995 175312 308307
New Entrepreneurs (Crores) 1.2 1 2.2
Women Entrepreneurs 2.7 2.9 5.6
Type of Loans
Sishu Loan (Crores) 3.2 3.6 6.8
Kishore Loan (Lac) 20 26.6 46.6
Tarun Loan (Lac) 4 5.4 9.4

We do not know if these small ventures are still continuing. It is also not known, the women entrepreneurs who availed the loan were first time business people, or they had used the loan to expand their business? It can be taken with some certainty that around 2 crore new entrepreneurs were created. This is in line with promise of creating one crore employment opportunity a year. Secondly, if 5.6 crore women entrepreneurs are added to 2 crore, close 8 crore employment opportunities were created or stabilised.


Monthly Income


Self Employed

(% of work force)


(% of work force)

46 17
<5000 41 18.7
5000 – 10000 43 38
10000 – 100000 15 44.7
Report on the Fifth Annual Employment – Unemployment Survey, 2016

As is seen from table above, around 46% of Indian work force is in informal and self employed sector. In this category, majority people earn between 5000 – 10000 rupees per month. By contrast, only 17% work force is in salaried category. Nearly 45% of salaried people earn between 10000 to 100000 rupees per month.

It is not a surprise that most people like to have a job with salary at the end of the month. By contrast, self employment is given a look only as a second choice when they do not find a suitable job. A noted commentator claimed on national TV, “who wants to become tea vendor, if he has better option available?” It should be kept in mind self employment is not selling tea alone. It can involve a variety of different opportunities, if one is open and creative enough to tap the supply and demand gap. From the report card of MUDRA scheme, it is apparent that a majority of people who were granted loans were engaged in a wide variety of professions. The business these people setup using loan from MUDRA scheme, have helped many to build a home for themselves, send their children to school, some even employed another person. These are common aspiration of all citizens. By strengthening people at the bottom of job pyramid, government is creating a strong base. Given the vagaries of employment scenario it may appear that self employment may be a way to go for future. Government is trying to steer people in that direction.



9 thoughts on “MUDRA Scheme is Encouraging Self Employment

Add yours

    1. I think in India we educated middle class look for salaried job. It has advantage of fixed salary. But entrepreneurial culture is new to us. There is startup culture coming. One has to have a good saleable idea and then marketing skill. For small business Mudra Scheme as micro finance may help small guy whom bank do not lend normally. I think unless bottom of pyramid is strong Indian economy may not be strong. For last ten year and more India may have had high growth but jobless growth.

      Liked by 1 person

      1. Yes, job creation at the bottom of the pyramid will result in inclusive growth. However there could be a possibility that people use the loan money to meet daily ends instead of setting/ scaling up small business,


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Blog at

Up ↑

%d bloggers like this: