If there is anything that the Union Budget for FY2025 will be remembered for it will be for its focus on stoking job creation. After all, rural distress and unemployment were among the main reasons that BJP suffered major reverses in the Lok Sabha elections; and the Modi government, hanging on a thread of demanding coalition partners, is keen to reverse the trend.
It is also significant that the push for jobs has found bipartisan approval. Former Union finance minister P. Chidambaram lost no time in reminding the current finance minister, Nirmala Sitharaman, of plagiarizing from the Congress Manifesto.
“I am happy she has virtually adopted the Employment-linked incentive (ELI) outlined on page 30 of the Congress manifesto. I am also happy that she has introduced the Apprenticeship scheme … spelt out on page 11 of the Congress manifesto,” the former Finance Minister jeered in a series of posts on X.
The size of the employment booster is humungous – Rs 4.8 lakh crore spread over 5 years and 5 schemes. The focus is on first-timers and new recruits, and the government hopes it will benefit as many as 3 crore youth.
Scheme A - Direct Benefit Transfer of 1-month salary in 3 instalments up to Rs 15,000 to first-time employees registered in EPFO.
Scheme B – Creation of jobs through manufacturing incentives for both employee and employers, as per their EPFO contribution, in the first 4 years of employment.
Scheme C - Reimbursement to employers up to 3,000 per month for 2 years as an incentive for every additional employee added to their workforce.
Besides the direct benefit incentives, the government has announced an ambitious skilling scheme, in collaboration with employers, for upgrading 20 lakh youth over the next 5 years. As a sweetener the model skilling loan scheme will now provide loans up to Rs 7.5 lakh per trainee.
But are all these measures enough to move the needle?
Growing joblessness
Let’s look for a moment at the size of the problem. According to private data agency, the Centre For Monitoring Indian Economy (CMIE), India’s unemployment rate – the percentage of people unemployed – stood at 9.2% in June this year. This is a sharp increase from 7% in May 2024.
Slice the numbers further and one realizes it is the youth that bears the yoke – 83% of the jobless population is under the age of 34, according to the India Employment Report 2024 published by the International Labour Organization (ILO) and the Institute of Human Development (IHD).
The problem is big. According to CMIE, the unemployment rate for youth aged 20-24 soared to an alarming 44.49% in early 2024, while nearly 16% of urban youth aged 15-29 were jobless in 2022-23 due to inadequate skills and a lack of quality jobs.
Hindustan Unilever (HUL) managing director Rohit Jawa bemoaned the poor growth in sales of the company’s consumer products at just 3% in the past financial year and put it down to low employment levels and wages as well as food inflation in rural India.
To address the problem, and to account for the new numbers entering the workforce, the recent government’s Economic Survey estimates the economy must generate 80 lakh jobs annually for the next 30 years. Even if the schemes proposed by the government run full pelt, and they reach 100% target, we still have a shortfall of one crore jobs in every 5-year cycle.
Will private units help?
Much of the success of the government’s job generation schemes depends on the participation by private employers? But will they play ball?
For instance, the 5th scheme in the job package provides for internship in 500 top companies to one crore youth over 5 years. For the training and opportunities provided the companies participating will be paid an internship allowance of Rs 5,000 per month per intern, along with a one-time assistance of Rs 6,000. The cost of internship and training will be borne by the companies from their CSR funds.
It is quite an unusual scheme and likely to be doomed to failure. It assumes each of these 500 companies will train 20,000 interns over 5 years – a massive call. How will these interns be chosen? Where will they be deployed. Private companies make their business plansand hire specific skill sets based on market demand and their profit targets. This may not be in line with the government’s job training targets.
Again, ‘Scheme C’ envisages private companies hiring additional working hands and being compensated Rs 3,000 per month per worker through EPFO contributions for 2 years. It is difficult to imagine why private businesses should recruit extra hands for these paltry reimbursements if it does not fit their business plans.
Private companies in India have been notoriously tight-fisted in deploying fresh capital and have been reluctant to kickstart expansion. This is well known, and it is surprising how budget proposals have been hitched to an indeterminate private sector.
Spending on crucial infrastructure projects by the government works better. So do targeted schemes like the Rural Employment Guarantee Scheme (MGNREGA) that provide jobs in lean seasons to rural folk.
