Budget 2024: A convoluted approach to job creation Premium

Budget 2024: Incentivising private sector employment through wage subsidies and skill development to solve the unemployment crisis reflects a dogmatic mindset out of sync with ground realities

The chapter on employment in the Economic Survey starts with the observation: “Employment is the crucial link between growth and prosperity, and its quantity and quality determine the extent to which economic output translates into better quality of life for the population.” This “crucial link” between growth of economic output, measured by official GDP estimates, and gainful employment, especially decent jobs in the formal economy, has become increasingly tenuous.

The Survey cites official data to corroborate the jobless growth experience. Factory jobs in manufacturing have grown only by 32 lakh between 2013-14 and 2021-22, with only three States (Tamil Nadu, Gujarat and Maharashtra) accounting for 40% of total factory sector employment in India. There was an overall reduction of 16.45 lakh in total employment in unincorporated non-agricultural establishments in manufacturing and services (2015-16 to 2022-23).

India’s total workforce was estimated at 56.5 crore in 2022-23, of which over 57% were self-employed with average monthly earnings at ₹13,347. Over 18% worked as “unpaid workers in household enterprises”. The proportion of the workforce engaged in agriculture increased from 44% in 2017-18 to almost 46% in 2022-23. In this backdrop, the Survey has estimated that the economy needs to generate an average of nearly 78.5 lakh non-farm jobs annually until 2030 to cater to the rising workforce.

The Finance Minister has attempted to address the challenge of employment generation by unveiling three ‘employment linked incentive’ schemes. The first proposes to provide the first month’s wage to all first-time employees, registered in the EPFO, up to a ceiling of ₹15,000. The second scheme is also a wage subsidy for first-time employees in the manufacturing sector, to be paid partly to the employer and partly to employees. The third scheme is for employers providing additional jobs, envisaging a reimbursement of ₹3,000 per month in EPFO employer contribution for two years.

Additionally, 1,000 Industrial Training Institutes are to be upgraded with a total outlay of ₹60,000 crore in five years, where the Union government’s expenditure would be half and the rest to be borne by the State governments and CSR funds. Further, a 12 months ‘Prime Minister’s Internship’ with a monthly allowance of ₹5,000 per month plus one-time assistance of ₹6,000 has been announced, with youth aged 21 to 24 being eligible.

The government has announced an outlay of ₹2 lakh crore for five years on a ‘Prime Minister’s Package for Employment and Skilling’ and claims that 4.1 crore youth would emerge as “beneficiaries”. It is clear that this has been designed to meet the 78.5 lakh to 81 lakh annual non-farm jobs requirement in the next decade.

Whatever incentivisation occurs through these schemes, the jobs created under them in the short run are unlikely to last beyond the subsidy period. Large-scale job shedding in the medium run can further complicate the situation. The incentive schemes based on EPFO enrolment can also turn out to be conduits for siphoning off public funds by fudging payrolls and misreporting wages.