Last week, the Prime Minister once again tried to address the failure of his government to spur any meaningful growth of employment by making false claims. His answer to this is to keep insisting that the total loans disbursed under the Mudra scheme. Narendra Modi now claims that “loans worth Rs 6 lakh crores have been given to 12 million beneficiaries under the Mudra scheme” while accusing the previous government of tokenism. This is artful lying at its best, or worst. It is nevertheless a huge fib. It reminds me of the Celtic fairy tale about “how the little Wren became the king of all birds”. It is about the clever wren inveigled itself into the big span of the eagle who rose to great heights till it could go no more in a bid to win the contest, only to have the little bird to leap out to take a little jump and claim victory. Our Modiji is like that wren: Very clever and very opportunistic, but not quite honest.
There are many variations of this fable world over, and Mr Modi has done well by it. He just rides piggyback on all earlier achievements. Take for instance electrification. As per the 2001 Census, there are a total of 5,97,464 inhabited villages in India. Out of which 5,71,168 villages were electrified as on April 30, 2014. All Union Territories were 100 per cent villages electrified, excluding Andaman and Nicobar Islands (77.8 per cent electrified). A few major states such as Andhra Pradesh, Gujarat, Haryana, Kerala, Punjab and Tamil Nadu had 100 per cent villages electrified. Only 10 states Arunachal Pradesh, Bihar, Jharkhand, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Rajasthan and Andaman and Nicobar Islands were below the national average (95.6 per cent) in April 2014.
When the remote village of Leishang in the Naga Hills was connected with electricity, the last of the 18,458 villages without electricity was connected. This final 4.4 per cent was achieved by the Modi regime. But Mr Modi went about it artfully by only saying his government has achieved 100 per cent electrification. There was no mention that when India became independent only 1,500 villages had electric connections. It was another case of the wren hopping off the eagles back and claiming it had flown higher. It probably did in a technical sense. But we know who did all the heavy lifting before that by building the great power generation capacity and building the nationwide power grid. To keep repeating ad nauseam that nothing was done till his advent and then harp on 100 per cent achievement is just being cleverer by half. But Mr Modi is the master of the artful fib.
That does not mean all households have electricity. As per the Union power ministry’s definition, a village is deemed electrified if at least 10 per cent of the households in it have power connections and if electricity is provided in public places such as schools, panchayat offices, health centres and community centres. This is why even though 100 per cent electrification of villages has been achieved; government data shows that as of today, of the total of approximately 150 million households, there are still 31 million households without electricity. The houses without electricity by and large are homes of the officially poor like marginal farmers and rural workers. If they get a decent income, which means regular and meaningful livelihoods, they too will get their homes electric connections. This is where job creation matters. A subject the Prime Minister would like to obfuscate, given his government’s sad record.
Now let’s get back to the Mudra finance scheme. It is now just all the older schemes operated by the entire banking system under one new label. It’s not new wine in new bottles. It’s not even new wine in old bottles. It is just the same old wine in the same old bottles. Only now all the bottles have a new label, Mudra.
The Mudra website shows that Rs 5 trillion has been disbursed by banks, micro-finance companies and non-banking financial companies since the inception of the scheme. Indeed, it is easy to measure the success of the scheme through disbursals of loans but lenders have historically been giving out small loans anyway. Given that the business model of micro-lenders is to give such loans, the branding of Mudra as a special scheme is essentially dishonest.
The utility of the Mudra scheme can only be measured by the refinance support that the Mudra agency extends toward such disbursals. The progress here is nothing much to write home about. The outstanding refinance provided by the government as of March 2017 was just Rs 6,114 crores or less than two per cent of the cumulative disbursals. For 2018-19, refinance provided during the current year is just Rs 633 crores suggesting that the scheme has begun tapering off. That Mudra has created 30, 50 or 70 million new jobs depending on which is the BJP spokesperson a tiresome and cruel fib. About 450 million persons are employed in the informal sector in India. Close to 81 per cent of all employed persons in India make a living by working in the informal sector, with only 6.5 per cent in the formal sector and 0.8 per cent in the household sector. The low household employment in itself suggests the Mudra loans have not had the desired penetration. Bangladesh by contrast has 13.5 per cent employment in the household sector.
To get a better idea about how credit to the poor is faring one has just to look at the numbers provided by the RBI. The credit/deposit ratio for the rural population increased from 41 per cent in 1999 to 66.9 per cent in 2016. It has stagnated since then. The share of small borrowers (borrowing less than Rs 2 lakhs) has been falling during the Modi regime. The share of small loan accounts has been dropping steadily for over a decade and there is no sign of it moving upwards. As of now small loans account for just 0.4 per cent of the outstanding loans and 0.8 per cent of the number of accounts. From 2008 the credit/deposit ratio of rural India has been dropping, suggesting the flight of capital from Bharat to India continues unabated.
As a matter of fact, the credit/deposit ratio for metropolitan India has been increasing and is now up by 10 per cent since 2000 when it was 0.70 per cent. One consequence of this is that now two out of three poor take credit from informal sources. One clear policy suggestion from this is that farm loan waivers don’t help poor farmers. It is mostly the politically active middle and large farmers who befit from this, and they are less than 15 per cent of all farmers.
So Modiji, stop flying on the eagles back and learn to fly on your own. And stop fibbing. The truth has a way of catching up in the end.