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News Analysis


Prime Minister's Employment Generation Program

  • 21 Aug 2020
  • 4 min read

Why in News

The approval of projects under the Prime Minister's Employment Generation Program (PMEGP) increased 44% during the first five months (April - August) of the financial year 2020-21.

  • Khadi and Village Industries Commission (KVIC) has approved and forwarded 1.03 lakh project applications to the banks as compared to 71,556 projects during the corresponding period in 2019.
  • The higher number of projects approved signifies the government’s resolve to create self-employment and sustainable livelihood for the people by promoting local manufacturing.

Key Points

  • Launch: The Government of India approved the introduction of a credit linked subsidy programme called Prime Minister's Employment Generation Programme (PMEGP) in 2008 for generation of employment opportunities through establishment of micro enterprises in rural as well as urban areas.
  • Administration: It is a central sector scheme being administered by the Ministry of Micro, Small and Medium Enterprises (MoMSME).
  • Implementing Agency at the National Level: Khadi and Village Industries Commission (KVIC) - a statutory organization under the administrative control of the Ministry of MSME.
  • Features: It allows entrepreneurs to set up factories or units.
    • Eligibility:
      • Any individual, above 18 years of age.
      • Only new projects/units are considered for sanction of loans.
      • Self-help groups that have not availed benefits under any other public scheme, societies, production co-operative societies, and charitable trusts.
    • Maximum Cost of Project/Unit Admissible:
      • Manufacturing Sector: Rs. 25 lakh
      • Service Sector: Rs.10 lakh
    • Government Subsidy:
      • Rural Areas: 25% for general category and 35% for special category, which includes SC/ST/OBC/Minorities, NER, Hill and Border Areas.
      • Urban Areas: 15% for general category and 25% for special category.
    • Role of Banks: Loans are provided by Public Sector Banks, Regional Rural Banks, Co-operative Banks and Private Scheduled Commercial Banks approved by respective State Task Force Committee.
  • The MoMSME has also launched a scheme of ‘second financial assistance’ to help the PMEGP and Mudra units expand or upgrade.


  • The Scheme is crippled by structural issues and high rate of Non-Performing Assets (NPAs). From 2015-16 to 2019-20, assistance of Rs. 10,169 crore was provided. Out of this, Rs. 1,537 crore has turned out to be NPA.
  • A deficiency in skills, lack of market study, low demand and stiff competition are believed to be the key reasons for such a large number of NPAs.
  • While normally all central schemes are given definite annual targets, this scheme is not driven by any such target. As both the states and the banks work without the aim of completing the annual target of disbursement of loans, the programme may lose its drive.

Way Forward

  • Besides providing financial support, the government needs to conduct an intensive training programme to help potential entrepreneurs focus on the right market and right products.
  • The scheme can prove beneficial at the time when the economy needs to recover from the effects of the Covid-19 pandemic. Timely disbursal of funds is crucial for execution of projects and creating employment in the country.

Source: PIB

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