Employment-linked incentive schemes worth ₹2 lakh crore to boost job creation in Budget 2024

The government’s focus on economic growth was led by rapid infrastructure growth, and steadily raised the capital expenditure at the central level and through constant capital support to states through a 50-year loan for capex projects.

But this hasn’t brought the desired results in terms of job creation. To solve for this, and to spur consumption growth, the government announced a slew of measures to promote job-intensive economic growth.

The focus is to promote job growth by tackling it at multiple stages of a fresher’s employment journey.

Finance Minister Nirmala Sitharaman announced three schemes to boost employment in her union budget speech. Apart from this, she also announced many ancillary employment promotion schemes like upgrading 1,000 ITIs across India, an internship promotion scheme in the top 500 firms in India, and a housing scheme in PPP mode for industrial workers.

There are also measures announced that seek to promote employment of women, with specific outlays to promote employment of women, promotion of self-help groups, establishing working women’s hostels, and women-specific skilling programs.

3 schemes for employment promotion

These measures seem to reorient the government’s economic policy over five years.

Scheme A: To promote hiring of first-time employees and enrolments into EPFO, a one-month wage payout of up to ₹15,000, in three instalments for each first-timer hired by businesses. The salary eligibility is up to ₹1 lakh. This is expected to benefit 210 lakh young people.

Scheme B: To constantly support employers for some part of the incremental expenditure of new enrolments into the EPFO in the manufacturing sector, reimbursement of EPFO contributions for four years will be provided. This scheme is expected to benefit 30 lakh people.

Scheme C: Additional reimbursements of EPFO contributions up to ₹3,000 per month for each additional employee hired for two years to employers. This scheme is expected to benefit 50 lakh people.

Promotion of internships in India’s top 500 companies

The Finance Minister also announced an internship promotion scheme that will benefit nearly 1 crore people over 5 years. India’s top 500 companies will be enlisted for this scheme. An internship allowance or stipend of ₹5,000 per month will be paid for 12 months to each intern hired by the top 500 companies, with a one-time assistance of ₹6,000 to each.

The remaining cost of training up to 10% can be met by the companies from their CSR funds, providing a new way to channel their CSR obligations as well. The government expects the interns to get trained in real life scenarios through this outlay, and can pick up skills that makes them employable.

Will these work?

In tandem, if these schemes manage to enthuse employers to hire more people, the stated objective of upskilling and supporting internships, and EPFO contributions, and additional reimbursement of EPFO contributions by employers. The additional assistance to employees and interns, tries to provide a five year roadmap to continuously increase the potential of creating jobs in India.

But whether these schemes will actually see a commensurate response from corporate India remains to be seen. After an initial burst post the pandemic, the corporate sector has slowed down on investments, as consumption growth hasn’t kept pace with capacity expansion.

It is almost a chicken and egg story. If consumption expenditure picks up, then businesses will invest in expanding capacity. But consumption won’t rise unless there is a boost in incomes. The employment-linked incentives tries bridge this gap by providing first-timers and their employers assistance by picking up the tab on part of additional expenses for both employees and employers, and also interns.

Over five years, these schemes strive to promote employment growth with a target of over 4 crore beneficiaries. If it happens at that pace, will that number be enough for India’s rapidly growing young population is what needs to be watched closely.

All the stakeholders including the government and the corporate sector will need to work together to ensure employment growth through this scheme.