Evaluate PM's job scheme for sustainability: Study

A report says it is 'highly debatable' whether investment levels are optimal

The average investment per unit in micro enterprises set up under the Prime Minister's Employment Generation Programme (PMEGP) is Rs 5.33 lakh and the average employment created is nine employees per unit, reveals an evaluation of the programme over the period 2008-09 to 2012-13, conducted by Nathan Economic Consulting India Private Limited for Ficci-Confederation of MSME.

The report says that it is "highly debatable" whether these investment levels are optimal, and would be adequate to generate large-enough surpluses to provide a reasonably remunerative income to sustain nine employees. The scheme therefore needs to be evaluated for sustainability and impact before it is scaled up, it adds.

Encouragingly however, the study reveals that between 2008-09 (when the programme was launched) and 2012-13, about 80 per cent of the target for the number of projects assisted under the PMEGP has been achieved, as has 75 per cent of the employment generation target; and 99.4 per cent of government subsidies known as margin money released to MSME start-ups have been utilised.

The targets for this five-year period for margin money released, number of projects assisted and employment generated were Rs 4,173.7 crore, 278,550 projects and 2.68 million jobs respectively. Actual margin money utilised was Rs 4148.35 crore; 222,167 projects were assisted and 2.035 million jobs were created.

Equally encouraging is a regression analysis carried out by the study, which found a "statistically significant" positive impact of employment generated under the PMEGP on gross state domestic product. The analysis showed that a 10 per cent increase in employment under the PMEGP led to a 1.5 percentage point increase in the GDP of the state concerned.

The PMEGP was launched on August 15, 2008 by merging two schemes - the Prime Minister's Rojgar Yojna and the Rural Employment Generation Programme - into a new credit-linked subsidy programme. It is implemented by the Khadi and Village Industries Commission, a statutory organisation under the ministry of MSME, and aims to generate jobs through the setting up of micro enterprises in rural and urban areas, and ensuring high and continuous credit flows to the micro enterprise sector.

Margin money subsidies are provided to those starting new enterprises in the manufacturing and service sectors. The rate of subsidy varies from 25 per cent to 35 per cent, while the maximum project cost permitted in the manufacturing and service sectors is Rs 25 lakh and Rs 10 lakh respectively.

Implementation of the PMEGP has been found to be relatively more effective in states having a lower MSME base. Nearly 26 per cent of the projects assisted were in West Bengal, Assam and Odisha, whose share of India's MSMEs is only 5.3 per cent. "The geographical spread and dispersal of units to areas which were hitherto not so conducive for entrepreneurship is a welcome development and should be supported," the report observes.

The top five states from the point of view of number of projects assisted were West Bengal (29,212 projects), Uttar Pradesh (21,454), Assam (21,030), Maharashtra (16,164) and Odisha (12, 207).

The leading state from the point of view of employment generated since the PMEGP's inception is West Bengal (2,87, 000 jobs), which received the maximum assistance from the government under the scheme and utilised all of the Rs 333 crore worth of margin money subsidy between 2008-09 and 2012-13. The other four states among the top five are Uttar Pradesh (2,19,000 jobs), Andhra Pradesh (1,90,000 jobs), Tamil Nadu (1,73,000 jobs) and Assam (1,31,000 jobs).