ELI proposals set to be moved to Cabinet soon

The labour ministry will “very soon” move the Union Cabinet for its approval to the three employment-linked incentive (ELI) proposed in the 2024-25 Budget -- steps aimed at boosting job opportunities and enhancing skills of an ever-growing workforce, labour and employment minister Mansukh Mandaviya has said.

In her 2024-25 Budget speech on July 3, finance minister Nirmala Sitharaman announced job-creation and education plans worth ₹1.48 lakh crore, unveiling incentives for firms enrolling first-time job-seekers to spur employment.

The proposals to be moved before the Cabinet include a publicly funded internship programme in 500 top Indian firms during the next five years. The first phase will kick off within the next few weeks and involves an estimated funding of ₹1.07 lakh crore.

“All three schemes will go to the Cabinet very soon. These will give our youths a unique opportunity to work in world-class companies. They will be exposed to corporate best practices and imbibe their work culture, which will help them to find employment opportunities in downstream industries,” Mandaviya said.

The budget announced what it called the “Prime Minister’s package of five schemes and initiatives” to facilitate employment and skilling opportunities for 40.1 million young people over a five-year period.

The internship programmes will be handy for job-seekers because even before they are hired, they will be familiar with “professional on-the-job requirements in the real world”, the minister said.

The corporate affairs ministry has been tasked with drawing the list of firms which will participate in the employment-linked sops, which will overall be steered by the labour ministry.

Even as Asia’s third-largest economy is positioning itself as an alternative manufacturing hub to China, the Modi-led government has its task cut out to create sufficient employment, especially for the youth that drives the country’s demographic bulge.

According to the government’s Economic Survey 2024, India needs to create 7.85 million non-farm jobs every year until 2030 to absorb its expanding labour force, way higher than the current rate of employment.

Figures released on Monday by the statistics ministry showed India’s annual unemployment rate stayed flat at 3.2% for July 2023 to June 2024 period compared to the previous year.

According to the Cabinet proposals being finalised, the first scheme will pay a month’s wages in three instalments as direct benefit transfer to all first-time employees entering the workforce in all formal sectors, up to ₹15,000.

All such employees must be registered with the Employment Provident Fund Organisation (EPFO), the State-run retirement fund manager, while the salary ceiling will be ₹1 lakh per month. The budget estimated that the scheme will benefit 21 million people over a five-year period.

Mandaviya said the government will put in place foolproof inbuilt systems and AI-driven technologies to monitor hirings and utilisation of funds provided by the government, when asked how authorities would ensure firms don’t pass off existing employees as new ones to benefit from the incentives.

The second scheme will offer an additional incentive tied to EPFO contributions to both employers and first-time employees in the manufacturing sector in the form of funds linked to a specified pay scale for the first four years of employment.

To push firms to hire more, a third employer-focused scheme covers additional employment created in all sectors. The government will reimburse firms up to ₹3,000 a month for two years towards their share of EPFO contribution for each additional employee hired.

Provident-fund savings are mandatory under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 for a firm with 20 or more employees. At least 12% of an employees’ salary is compulsorily deducted to be saved in provident funds, while an employer contributes another 12%.

“Apart from many other things, the uptake of these schemes will depend on matching skills with positions available in firms. A lot of unemployment among educated youths in our country is also because their educational qualification is not a match for jobs on offer,” said Ishwar Aravind, an economist with Delhi University.