In a significant move to uplift India’s rural economy, the government has launched a new scheme in 2025 offering ₹5 lakh grants to rural entrepreneurs. This initiative aims to promote self-employment, support small business ventures in villages, and reduce the migration of rural youth to urban centers. With a strong focus on rural entrepreneurship, this policy marks a major step in decentralizing economic growth and empowering underserved communities.
What is the ₹5 Lakh Grant Scheme?
The ₹5 lakh grant is a non-repayable financial assistance provided under the new Rural Innovation and Enterprise Development Scheme (REDS). Targeted specifically at budding entrepreneurs in rural India, this scheme is part of the broader national strategy to promote inclusive growth and support micro and small enterprises in agricultural and non-agricultural sectors alike.
Under REDS, eligible individuals can receive up to ₹5 lakh as seed capital to start or expand rural businesses. This govt grant is not a loan, meaning there is no requirement to repay the amount, provided the funds are used as intended.
Key Objectives of the Scheme
-
Empowerment through Entrepreneurship: By backing innovative business ideas, the government aims to shift rural populations from wage-based work to ownership and self-sufficiency.
-
Rural Economic Development: Encouraging rural entrepreneurship helps circulate income within villages, boosting local demand and job creation.
-
Curbing Urban Migration: Providing meaningful livelihood opportunities in rural areas reduces pressure on urban infrastructure and improves quality of life in villages.
Who Can Apply?
The scheme is open to a wide range of applicants, with a focus on inclusivity and equal opportunity:
-
Rural youth aged between 18 to 45
-
Women entrepreneurs and Self-Help Group (SHG) members
-
Artisans, farmers, and traditional craftspersons
-
Returnee migrants seeking to restart in their hometowns
-
SC/ST, OBC, and economically weaker sections (with relaxed eligibility conditions)
Types of Businesses Supported
The scheme supports both agri-based and non-agri ventures. Here are some examples:
-
Organic farming and food processing units
-
Dairy farming, poultry, and fisheries
-
Rural tourism and eco-resorts
-
Handicrafts and cottage industries
-
Rural logistics, warehousing, and packaging services
-
Renewable energy projects such as biogas or solar panel installation
The idea is to provide flexibility and accommodate region-specific business models. For instance, someone in a coastal village may opt for a seafood packaging unit, while another in a tribal area may start a herbal products venture.
How to Apply for the ₹5 Lakh Grant
The application process is fully digital and streamlined for accessibility. Here’s how it works:
-
Visit the official REDS portal on the Ministry of Rural Development website.
-
Register with your Aadhaar number, mobile number, and rural address proof.
-
Submit your business proposal outlining your plan, expected costs, and impact.
-
Undergo basic training provided by state-level entrepreneurship centers.
-
After evaluation, approved candidates receive the grant in phases linked to business milestones.
Local panchayats and Krishi Vigyan Kendras are also equipped to guide applicants through the process.
Additional Support Beyond Funding
This scheme goes beyond just financial aid. Recognizing the challenges first-time rural entrepreneurs face, the government is offering:
-
Mentorship and skill development through rural incubation centers
-
Access to markets via tie-ups with e-commerce platforms
-
Tech support for digital onboarding and financial literacy
-
Priority procurement from rural entrepreneurs under government tenders
These features are designed to ensure that the grants lead to sustainable ventures, not just short-term income.
Role of State Governments and NGOs
State governments will play a key role in monitoring and executing the scheme. They’ll partner with non-governmental organizations (NGOs) and rural banks to ensure transparency, prevent misuse, and help entrepreneurs with documentation and compliance.
Impact Forecast
By 2026, the scheme is expected to fund over 1 million rural businesses, generating an estimated 3-4 million jobs across India. It also contributes directly to the national goal of increasing the rural economy’s share in the GDP from 46% to 55% within the next five years.
FAQs
Q1. Is this ₹5 lakh grant a loan?
No, it is a non-repayable govt grant, provided you meet the usage and reporting requirements of the scheme.
Q2. Can someone from a semi-urban area apply?
Only applicants residing in officially designated rural areas are eligible.
Q3. Can I use the grant to buy land?
No. The grant is strictly for business development—equipment, raw materials, training, and marketing.
Q4. What happens if my business fails?
If the grant has been used for its intended purpose and there is no evidence of misuse, you will not be penalized for business failure.
Q5. Is there a deadline for applications?
Yes, the first phase closes on 31st December 2025. Early application is advised due to high demand.
click here to learn more