PMEGP scheme is integrated two earlier schemes, viz. Prime Minister’s Rojgar Yojana (PMRY) and the Rural Employment Generation Programme (REGP) that were working along similar lines to generate employment among the youth. Under this scheme, the beneficiary has to invest only 5-10% of the project cost while the government provides a Subsidy of 15-35% of the project based on different criteria. The participating banks provide the rest of the funds as term loans to the entrepreneur.

The PMEGP has a four-fold objectives:

(1) To create employment in rural, as well as urban areas in India by setting up new self-employment micro enterprises or projects.
(2) To provide a common ground for the widely dispersed traditional artisans and unemployed youth in both rural and urban areas to come together and create self-employment avenues.
(3) To take steps to prevent migration of rural people to cities to seek employment by giving them stable and sustainable employment. This is especially for traditional and prospective artisans and rural and urban unemployed youth who get traditional or seasonal employment and remain unemployed rest of the year.
(4) To increase the income earning capacity of artisans and focus on increasing the growth rate of rural and urban employment.