Can Mudra loan scheme play role in economic recovery?

Expectations of the Indian economy soon bouncing back to its fast-growing ways have mounted following a cut in corporate tax rates and the approaching festival season.

It may thus be a good time to learn whether the ‘animal spirits’ of enterprises that emerged as a direct by-product of the Mudra loan scheme could hasten the process of economic recovery with information made available on the performance of these businesses on the key metrics of revenue and profitability based on their tax records.

Since its formal launch in April 2015, very few entrepreneurship promotion initiatives in India have caught the public imagination as much as Mudra, which provides loans ranging from Rs 50,000 to Rs 10 lakh, owing largely to its focus on the often credit-starved informal segment that provides livelihood opportunities to countless millions even at the bottom of the pyramid.

As per the 2017-18 Mudra Annual Report (the latest data available in the public domain), there were 48,130,593 Mudra loan accounts as on March 31, 2018. Total sanctions to borrowers in FY18 stood at Rs 2,53,677.11 crore with the average loan size that fiscal pegged at Rs 52,739.

With slightly over six months to go for the Mudra programme to complete five years, the time may have come for the authorities to offer stakeholders more concrete data-backed evidence that sanctions under the scheme so far running into several thousands of crores have been a good utilisation of taxpayer money.

Releasing information on Mudra loan beneficiaries who have become eligible to file I-T returns, have started paying taxes on their incomes, and the quantum of average taxes paid where such is the case may be a good way to demonstrate how effective the scheme has been in augmenting incomes of micro and small entrepreneurs, many of whom are first generation businesspeople. Such a step could also offer tangible evidence of how the scheme has contributed to promoting women empowerment given that women have been a major focus category for the exercise.

Making generic I-T data public of Mudra loan recipient-turned taxpayers may, in addition, serve the useful purpose of encouraging more youth to voluntarily consider entrepreneurship/self-employment as a viable career option and not view it as a poor substitute for inability to find jobs of choice. Moreover, the I-T-related information could hold out signs of the business segments which hold most promise for aspiring young entrepreneurs focused on the MSME segment.

A beginning in this regard may be made by providing income growth data captured in I-T records of those who availed the smallest ticket size loan under Mudra — borrowers who sought funds under the Shishu category where the maximum loan provided is Rs 50,000. The highest number of sanctions under Mudra, both in volume and value terms, has been to the Shishu segment.

Similar information could thereafter be provided for those who were provided loans of a higher magnitude under the heads, Kishor (where the maximum loan provided is Rs 5 lakh) and Tarun (where the maximum loan provided is Rs 1o lakh). In FY 2017-18, borrowers under the Shishu category were sanctioned a total amount of Rs 1,06,001.6 crore and those under Kishor Rs 86,732.15 crore. Borrowers who fell under the head Tarun were cumulatively sanctioned Rs 60,943.36 crore that fiscal.

Given the amount of data crunching already undertaken by the I-T department and compulsory PAN and Aadhaar linkage with bank accounts, obtaining the kind of information on its borrowers mentioned above should not prove too difficult a task for the authorities. In fact, a greater transparency on borrower performance would only add more lustre to the Mudra scheme.

Sumali Moitra is a current affairs commentator. Twitter: @sumalimoitra. Views are personal.