MUDRA scheme was an initiative by the Indian Government to aid MSMEs, both with their establishment as well as their upgrade.
With many different slabs of credit being offered under this scheme, users have the option to choose the exact amount of financing they require.
Launched more than half a decade ago, MUDRA loan has already impacted the Indian economy with its benefits.
The overall contribution of this scheme on the Indian economy has been positive, even though it is necessary to look at the different aspects of its contribution.
While there are many business loans offered by numerous financial institutions, MUDRA scheme has especially affected the economy because of its financial feasibility and easy availability.
- 2.9 crore MUDRA scheme applicants got approval in the last fiscal year.
- More than Rs.1.41 lakh crore was released in these loans.
The impact and contributions of MUDRA scheme on the Indian economy are discussed below in detail. These have been directly affected by the numerous benefits offered under this scheme, which are explained in a later section.
- Developing the GDP: A major impact of this loan scheme from the Government of India has been the bettering of the GDP. While the average global rate of GDP growth currently ranges above 3%, the Indian GDP is estimated to cross 7%. This massive surge can be contributed to the rise of startups and MSMEs in India which in turn have been impacted by the availability of easy credit under this loan scheme.
- Creating employment opportunities: While there are numerous ways in which MUDRA loans can be demystified, it is important to note its impact on the employment sector of the country. Availability of easy credit has contributed to the rise in the number of MSMEs which has, in turn, created more job opportunities for the workforce. Currently, more than 106 million individuals are directly or indirectly employed by this sector, making it the second-largest employment sector in India after agriculture. Almost 40% of the Indian workforce is currently employed in MSMEs.
- Self-reliance: SMEs and MSMEs together manufacture more than 6,000 products. Business financing under MUDRA scheme has made Indian industrial and manufacturing sector self-reliant. Contributing to 45% of the Indian manufacturing output, this sector also contributes to roughly 6.11% of manufacturing GDP. In addition to the same, this sector also consists of 95% of the industrial units in the country.
- The massive rise in MSME sector due to MUDRA scheme has not just made the Indian industrial and manufacturing sector self-reliant: it has also increased Indian exports. It contributes to around 40% of all Indian exports.
Benefits of MUDRA loan
The numerous benefits which are offered by MUDRA loan are discussed beneath. The availability of credit under this scheme has encouraged budding entrepreneurs too.
- Easy availability of credit: MUDRA scheme offers easy credit to budding entrepreneurs to help them establish their business ventures. Furthermore, there is no processing charge for these loans which make the related expenditures even lesser for the borrowers. Any non-farming enterprise can apply for this loan.
- Collateral free loan: This business financing option from the Government of India does not require any collateral for its approval. This has 2 major advantages for entrepreneurs. Firstly, the approval procedure for this loan is much faster. Also, entrepreneurs do not have to worry about risking their assets since for business purposes.
- No end-use restriction: There is no end-use restriction on the loans offered under MUDRA scheme. These allow borrowers to use the money for any financial requirement whatsoever. Entrepreneurs can use this financing scheme to expand their business, maintain workflow capital, acquire technological upgrades, etc.
- Skill development: Among the aspects, one needs to know about government business loan schemes, it is important to note that this scheme also provides training programmes. These programmes include skill development, entrepreneurship development, sectoral development, etc.
- Range of credit: There are 3 types of schemes under MUDRA loans which offer specific loan amounts. The Shishu scheme offers up to Rs.50,000 in credit. Under Kishor scheme, borrowers can avail a loan amount ranging between Rs.50,000 and Rs.5 lakh. The last slab ranging between Rs.5 lakh and Rs.10 lakh is known as Tarun.
Entrepreneurs should note that in case they require business finance which exceeds Rs.10 lakh, they have to apply for a line of credit at other financial institutions. Reputed NBFC Bajaj Finserv provides pre-approved offers which make loan applications easy and simple.
- A total of more than Rs.6 lakh crore has been granted under MUDRA scheme.
- Out of a total of 12 crore beneficiaries, 28% are estimated to be entrepreneurs for the first time.
It is advisable for loan applicants to check the numerous tax benefits which are offered by the Government of India. Be it MUDRA loan or a usual business loan, availing tax exemptions can effectively reduce the overall expense in repaying such loans.