The PMEGP Paradox: Assessing the Long-Term Viability of Subsidized Micro-Enterprises in India

Abstract

The Prime Minister's Employment Generation Programme (PMEGP), a flagship scheme of the Government of India to promote grassroots entrepreneurship and inclusive growth, has sanctioned loans worth over ₹60,750 crore for nearly 5.87 lakh projects by March 2024, mostly in marginalized communities and rural areas. But the problem with creating so many micro-enterprises at such a subsidized cost is, how will they survive in the long run? In this paper, we evaluate the post-subsidy performance of PMEGP beneficiaries and examine key determinants of success, including formal credit access, mandatory Entrepreneurial Development Programmes (EDPs), educational background, and the magnitude of the subsidy. This analysis underscores the key differences in the rate of enterprise maturation, pointing to the fact that industrial units need three to five years to fully utilize capacity and should be evaluated on a long-term basis, and examines the moderating impact of gender and geographic location; although women receive higher subsidy rates (up to 35%), they still face systemic barriers such as socio-cultural norms, the digital divide, and disguised ownership; and although rural enterprises receive higher subsidies to offset infrastructural deficits, they operate in very different, and often more constrained, environments compared with urban enterprises that are in agglomeration economies. It also notes that metrics for setup of PMEGP are underestimating the real impact and that the paradigm must move from initial three months to five-year longitudinal evaluation, targeted digital literacy interventions, and tiered support systems to address these structural bottlenecks to help PMEGP move from being a successful job-creation engine to a driver of sustainable and equitable economic development.