Job Creation & Incentive
By Dhurjati Mukherjee
The Cabinet’s decision to roll out the Employment Linked Incentive (ELI) scheme with an outlay of over Rs 99,000 crore to create 3.5 crore jobs over the next two years, to be run by Employees Provident Fund Organisation (EPFO) from this August is welcome. Job creation is a critical problem given that the workforce is increasing with every passing year in a country with a massive population.
Delving into the scheme, it needs to be stated that its focus is on the formal sector which, no doubt, needs attention. The decision to pay one month’s wage of Rs 15,000 in two installments is fine but the limit prescribed i.e. up to a salary ceiling of Rs 1 lakh should be reconsidered. It’s very much on the higher side and should have instead been a maximum of Rs 50,000. Firms participating in the scheme will get a cash incentive of ¹ 3000 for each additional employee hired for two years. However, this should have been raised as it would help in garnering more employment.
Such an incentive scheme is necessary for the informal sector where conditions of work and the meager salary they receive need urgent attention. It would have been better if the government had simultaneously announced some scheme for this sector as it makes a valuable contribution to the country’s economy and absorbs a large section of the workforce.
It is also a fact that India needs to generate at least 8 million jobs every year over the next decade to stay on course for its goal of becoming a developed nation by 2047. This was rightly pointed out by Chief Economic Advisor V Anantha Nageswaran while addressing the Columbia India Summit 2025, at Columbia University in April. Nageswaran underlined the imperative to increase job creation and the proportion of manufacturing in the GDP of the country. He stressed that although India cannot dictate the international environment, it must work within its limitations to create a robust domestic growth trajectory conducive to creating more employment.
“We have a vision to construct a developed India in the 100th year of independence. But we must realize that the world around us in the next 10 to 20 years will not be as accommodative as it was in the past,” Nageswaran said. While our political leaders are harping on artificial intelligence, he warned that new technologies could potentially endanger low-skilled and entry-level jobs, rendering job generation a multifaceted endeavor. “We have to achieve the right equilibrium between technology take-up and jobs-led policies,” he said.
Not just Nageswaran but most economists have been emphasising the need to build India’s small and medium enterprises (SMEs), which are critical to expanding the manufacturing base. “No country has made it in manufacturing without a strong SME base,” he added. But unfortunately, the contribution of manufacturing to GDP has not increased while job creation in this segment is far from satisfactory.
It is estimated that over 66 per cent of its population is of working age. India’s median age is 29.5 years, which starkly contrasts with China’s 39.8 years and the United Kingdom’s 40.6 years. This emphasizes the tremendous potential of a dynamic, innovative, and youthful workforce but providing adequate employment is not an easy task in this age of mechanisation. Though some label it as an opportunity, it may be so for a developed economy but not an emerging one like India.
Going by statistics, between 2014 and 2024, India created 17.19 crore more jobs, compared to the previous decade’s creation of just 2.9 crore jobs (2004-14). Notably 4.6 crore jobs were added in the year 2023-24 alone. Some initiatives of the government helped in reducing unemployment and increasing workforce participation. The unemployment rate fell from 6 per cent in 2017-18 to 3.2 per cent in 2023-24, while the labour force participation rate rose from 49.8 per cent to 60.1 per cent during the same period.
These figures offer little reassurance, as both unemployment and significant underemployment persist. Low wages remain a problem even for qualified candidates; for instance, most MBA or B.Tech graduates earn only Rs 20,000–25,000 to start. Those relocating for work must cover living expenses from already modest salaries.
The obvious reason for the low remuneration is the large number of candidates available in the market and they cannot dictate terms. Economists believe that the salary structure has remained the same for the last 7-8 years or even more. With such low salary, the profitability of companies has obviously increased. The government may consider fixing an entry-level minimum salary for such candidates, joining the private sector.
At this juncture the government should focus more on high-skill, high-pay employment opportunities. India has one of the world’s most significant numbers of graduates in STEM — science, technology, engineering, and mathematics — fields. A closer look at technical education is imperative as India produces 1.5 million engineers annually. But only 10 to 15 per cent of this number was expected to secure deserving jobs in 2024. Materials engineers, more relevant for industrial manufacturing, are only a few thousand.
For job creation, there is a need for the institutions to coordinate with industry and reorient technical education as per their needs. It also needs to be pointed out in this connection that the government should support self-employed sectors, which show higher mobility potential and need support through credit, training, digital inclusion and market access.
Specialized skills in areas such as artificial intelligence, automation, robotics, electric mobility as also marine engineering, space technology etc. may help in garnering employment but that would not be sufficient to tackle the problem of job creation. India’s ambitious target of achieving 500 GW of non-fossil fuel energy by 2030 is good for the environment and this may become one of the biggest job generators. Likewise, the Indian space economy, valued today at $8.4 billion, is supposed to reach $44 billion by 2033 and would create thousands of specialised jobs, directly or indirectly.
While private sector investments are called for in a big way, the thrust must be on the labour-intensive cottage and small units and special incentives need to be given to them. Moreover, export incentives may also be considered so that they can tap the global market. Plus, there is a need for professionalism and technology upgradation to compete in the international market.
What is of equal importance is that India needs to transform its present education curriculum with special emphasis on skilled education, right from the school statute. More investment in education is required for candidates to get the requisite qualification to enter the job market. It should go hand in hand with the incentive scheme. — INFA