For employment boost: FM Sitharaman announces 3 employment-linked incentive schemes, industry internship programme

Enrolment in the EPFO (Employees’ Provident Fund Organisation) will form the basis of the three ELI schemes, which will focus on recognition of first-time employees, workers in manufacturing, and additional job creation. The Finance Minister also announced a comprehensive internship scheme for providing internship opportunities to youth aged between 21 and 24 years in 500 top companies. This is expected to benefit 1 crore youth in five years.

“They will gain exposure for 12 months to real-life business environments, varied professions and employment opportunities. An internship allowance of Rs 5,000 per month along with a one-time assistance of Rs 6,000 will be provided. Companies will be expected to bear the training cost and 10 per cent of the internship cost from their CSR (corporate social responsibility) funds,” Sitharaman said in her Budget speech.

The ELI scheme came as a response to political criticism of the Production Linked Incentive (PLI) scheme which sought to extend benefits to companies for higher sales turnover, even if these did not result in any employment creation.

According to the Budget documents, the three ELI schemes will include the following features:

Scheme A

For first-timers: The scheme, which will be for two years, will provide a month’s wage to all employees entering the workforce in all formal sectors. There will be direct benefit transfer of one month’s salary — up to a limit of Rs 15,000 — in three instalments to first-time employees as registered with the EPFO. The salary eligibility limit for this scheme will be Rs 1 lakh per month. The scheme is likely to benefit 2.10 crore youths, Sitharaman said. Employees will have to undergo compulsory online financial literacy course before claiming the second instalment and the subsidy will be refunded by the employer if the employment to the first-time employee ends within 12 months of recruitment.

Scheme B

Job creation in manufacturing: This scheme will be launched with a view to incentivise additional employment in the manufacturing sector linked to the employment of first-time employees. All employers, corporate and non-corporate entities, with a three-year record of EPFO contribution, will be eligible. Incentives ranging between 8-24 per cent will be paid for four years to both employees and employers. The government expects the scheme to benefit 30 lakh youths and their employers.

Scheme C

Support to employers for additional jobs: This employer-focussed scheme will cover additional employment in all sectors. All additional employment within a salary limit of Rs 1 lakh per month will be counted under the scheme. The government will reimburse to employers up to Rs 3,000 per month for two years towards the EPFO contribution for each additional employee. The scheme is expected to incentivise additional employment of 50 lakh persons.

More details of these schemes are expected to come in later when they get notified. In addition to these ELI schemes and the internship programme, the government also intends to upgrade 1,000 Industrial Training Institutes (ITIs) in hub and spoke arrangements in five years.

Inadequate employment generation and loss of jobs in the informal sector was also flagged in the Economic Survey for 2023-24 that was tabled in Parliament on Monday.

According to the Periodic Labour Force Survey (PLFS), more than 45 per cent of the workforce is employed in agriculture, 11.4 per cent in manufacturing, 28.9 per cent in services, and 13.0 per cent is in construction. The Survey had pointed out that the predominance of agriculture in providing employment to nearly half of the population, especially females, is both a challenge and an opportunity.

The employment data underscores the importance of creating jobs in the formal sector. As per the Survey, in terms of employment status of workers, 57.3 per cent of the total workforce is self-employed, and 18.3 per cent is working as unpaid workers in household enterprises. Casual labour comprises 21.8 per cent of the total workforce and regular wage/salaried workers are 20.9 per cent of the total workforce. The Indian economy needs to generate an average of nearly 78.5 lakh jobs annually until 2030 in the non-farm sector to cater to the rising workforce, the Survey said.

The Survey had also called upon the private sector to step up its role in employment generation, terming it the “real bottom line” for the private sector. “It is worth reiterating that job creation happens mainly in the private sector. Second, many (not all) of the issues that influence economic growth, job creation and productivity and the actions to be taken therein are in the domain of state governments. So, in other words, India needs a tripartite compact, more than ever before, to deliver on the higher and rising aspirations of Indians and complete the journey to Viksit Bharat by 2047,” it had said.