Mudra = employment?

How viable these new jobs are is the real question

Given the poor jobs outlook, as made evident from the official data from a handful of sectors, it is not surprising that most of the interviews given by prime minister Narendra Modi in Tuesday’s newspapers had this as a common question. Apart from spelling out the gover nment’s initiatives on allowing shops to remain open 24x7 and the smart initiatives in the textiles policy— this allows freeing up low-paid workers from the clutches of the EPFO and also fixed-term employment—Modi spoke of the R1.3 lakh crore disbursed through the Micro Units Development & Refinance Agency (Mudra) to nearly 3.5 crore entrepreneurs in FY16 and said that the jobs created by them do not get reflected in the official labour statistics. Though the Mudra numbers look high, they broadly correlate with the official RBI data as well. The Mudra data show that, of the R1.3 lakh crore, around R87,000 crore was disbursed by banks including regional rural ones. RBI data on bank credit shows an additional R47,600 crore given to micro and small enterprises under the priority sector window in FY16. Another R62,500 crore was given out to ‘weaker sections’ under the priority sector window and could, theoretically, be covered by Mudra, though we don’t know for certain; there are several other such categories under RBI’s priority sector advances window.

Of the 3.5 crore Mudra entrepreneurs, 1.25 crore are new entrepreneurs who have been given a loan of a little under R50,000 each— these are the barbers and the washermen that the prime minister spoke of, while coining the phrase ‘personal sector’ to describe them. If each one of these entrepreneurs creates one job, that’s 1.25 crore new jobs, apart from the entrepreneurs themselves—ditto for the 2.25 crore older entrepreneurs. On their own, with such small capital—across all 3.5 crore entrepreneurs, the average loan disbursed in FY16 was R38,000—the jobs are clearly unviable; but if they are combined with an agriculture or temporary construction job, they may just be viable. On the other hand, they could just degenerate into another loan mela, with banks adding to their NPAs in the years to come. A more detailed analysis of the impact of Mudra in creating sustainable employment, both by government as well as by individual researchers, is clearly needed.