NEW DELHI: With the economy showing signs of turning the corner, Finance Minister Nirmala Sitharaman on Thursday laid down a framework for boosting employment and encouraging companies to consider re-hiring of workers, including those who may have lost their jobs during the lockdown.
Experts, however, have pointed out that the benefits of the proposed measures may manifest into a growth boost only over the medium term.
The government has announced a special EPFO subsidy for a period of two years for all new employees who joined office on or after October with a monthly salary of less than Rs 15,000.
Ordinarily, employees have to contribute 12 per cent of their salary towards EPF and employers have to match this contribution every month.
Now, the government will take care of the aggregate contribution of 24 per cent.
“This is a good incentive mechanism, but we would urge the government to reconsider the ceiling wage level of Rs 15,000 for applicability of the scheme as in many parts of the country the average wage levels are higher,” said Sangita Reddy, president of industry chamber FICCI.
Between April and August 2020, 23.7 lakh new EPF subscribers have joined while 10.1 lakh subscribers exited but re-joined and re-subscribed. Overall, there were 25 lakh net new EPF subscribers (as 8.8 lakh exited permanently).
“If we purely go by current trends, we believe that almost 15-20 lakh employees will be benefited by March 2021,” pointed out Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.
While the subsidy will leave greater disposable income in the hands of both the employee and the employer, especially those in small and medium-size firms, it should be noted that EPF is a long term savings instrument and does little to stimulate the economy in the near term.
“The Centre should consider allowing employees and employers to suspend EPF contributions for the next one year. It will release thousands of crore in liquidity to boost short term consumption and without any impact on fiscal deficit,” noted Rishi Agrawal, Co-founder & CEO, Avantis Regtech.
Thursday’s scheme focussing on employment is expected to cost the exchequer Rs 6,000 over the two years.
Apart from the Aatmanirbhar Bharat Rozgar Yojana, other measures such as the Rs 6,000 crore infusion in NIIF for debt funding infrastructure projects and additional allocation Rs 18,000 crore towards Pradhan Mantri Awas Yojana (PMAY) will also help increase job creation, experts note.
Taxation norms on real estate deals relaxed
Among the more important measures announced is a relaxation in income tax norms on the sale of residential units priced up to Rs 2 crore below prevailing circle rates.
Until now, only a difference of 10 per cent was allowed between the circle rate and the agreement value. This has now been increased to 20 per cent till June 30, 2021.