The Book of Job

FOR THE WORLD’S most populous country where more than 40 per cent of the estimat­ed population of 1.4 billion is aged below 25 years, Union Budget 2024-25 is a step in the right di­rection in that it has acknowledged and reacted to the fast-growing need to create new jobs and address a lack of employment opportunities.The numbers at hand are proof of the daunt­ing task for any government, especially since efforts to create decent jobs have been put in cold storage by successive federal dispensa­tions for decades. Sample this: an International Labour Organization (ILO) report titled ‘India Employment Report 2024: Youth Employ­ment, Education and Skills’ notes that in 2022, the share of unemployed youths in the total unemployed population was 82.9 per cent. “The share of educated youths among all unemployed people also increased, from 54.2% in 2000 to 65.7% in 2022. Among the educated (secondary level or higher) unemployed youths, women accounted for a larger share (76.7%) than men (62.2%). This indicates that the unemployment problem in India has become increasingly concentrated among the youth, especially educated youths and women in urban areas,” as the report points out.

As luck would have it, the Budget has made ambitious proposals to gener­ate jobs and train people to help them acquire good jobs. As of now, our labour market, segmented as it is, comprises a large chunk of unskilled workers most­ly in the informal sector, which employs more than 85 per cent of our work­force, and a small section in well-paid or relatively good white-collar jobs of taxpayers. The huge gap between both these categories is being filled, but the pace needs to be faster for India to take advan­tage of its demographic dividend. Or else, the economy will have to endure a demographic burden consisting of a large unemployed and under-skilled and unskilled population.

Finance Minister Nirmala Sitharaman has made all the right noises and good choices. In her speech, she announced five schemes to facilitate employment, and offer skilling and other opportunities for—according to her, 4.1 crore youths—over the next five years. The government has set aside ₹2 lakh crore for the purpose.

Among them are three schemes, collec­tively called “employment-linked incentives”. One of them will offer, according to the Budget document, a one-month wage to all persons newly entering the workforce in all formal sectors. “The direct benefit transfer of one-month salary in three instalments to first-time employees, as registered in the EPFO [Employ­ees’ Provident Fund Organisation], will be up to ₹15,000. The eligibility limit will be a salary of ₹₹1 lakh per month.” This scheme is worth ₹23,000 crore.

The second scheme envisages provid­ing incentives to both the employee and the employer. It involves helping out both with their EPFO contribution in the first four years of employment. As high as ₹52,000 crore has been allocated for them, which the government expects to benefit 30 lakh youths and their employers. The third one will reimburse employers up to ₹3,000 per month for two years towards their EPFO contri­bution for each additional employee who earns a salary of up to ₹1 lakh per month. The finance minister said the scheme is expected to in­centivise additional employment of 50 lakh people. The Budget also made proposals to fa­cilitate higher participation of women inthe workforce through setting up amenities to make their work-life balance easier.

The other schemes addressing job creation and skilling will cover more than 20 lakh youths who will be trained over five years, Sitharaman said in her speech. The Budget also said that an existing skill loan scheme will be revised to facilitate loans up to ₹7.5 lakh with a guarantee from a government-promoted fund. In addition, students will be able to avail of loans up to ₹10 lakh for higher education in domestic institutions. The Budget also came out with proposals to enable one crore youths to be skilled by India’s top companies in five years. The federal government will enlist support for all these schemes from the states and the private sector. In her speech, Nirmala Sitharaman also said that the government will launch a comprehensive scheme to provide internship opportunities in the top 500 companies to one crore youths in five years.

OTED ECONOMIST M SURESH BABU, DIRECTOR OF THE Madras Institute of Development Studies (MIDS), says that he isn’t entirely kicked about the Budget proposals although he feels that the scheme which offers incentives to both the employee and the employer in the first four years of employment makes sense as a measure to generate more jobs. He is not convinced however about how internships, which are reflective of the apprentice mindset of the past, will guarantee adequate job creation. He concedes that it helps in skilling, but his quibble is that skilling needs to be streamlined to meet new demands and such an overhaul is possible only through a comprehensive review of past and existing skilling programmes.

Meanwhile, the government hopes that its aggressive push in the infrastructure segment as well as in Micro, Small, and Medium Enterprises (MSMEs) will also help meet job requirements as the country forges ahead with its plan to become an economic powerhouse. The Central government has vowed to spend more on infrastructure to generate jobs, anticipating that its plans in this area will have a multiplier effect and stir up the economy, and the Union Budget confirms that resolve. The Centre had some years ago doubled its infrastructure spend to 3.4 per cent of gross domestic product. This time, the Union Budget announced a capital expenditure of ₹11.11 lakh crore to support the development of infrastruc­ture over the next five years.

The proposals in infrastructure development include a transit-oriented development plan for 14 large cities with a population of over 30 lakh, the creation of investment-ready “plug-n-play” industrial parks with complete infrastructure in or near 100 cities, and the setting up of Digital Public Infrastructure (DPI) in agriculture, power projects, ports, airports, and so on. The Centre will also spend ₹10 lakh crore to house people. In her Budget speech, Sitharaman said she has also made a provision of ₹2.66 lakh crore for rural development, including rural infrastructure.

Having invited criticism for an apparent slowness in the creation of new jobs, the government is now looking to revitalise the economy by emphasis­ing on prompt development of its MSME sector and towards making it go global. The Budget has announced a credit guarantee scheme for MSMEs by which they can avail of loans without collateral or third-party guarantee. Finance Minister Sitharaman said, “For facilitating term loans to MSMEs for the purchase of machinery and equipment without collateral or third-party guarantee, a credit guarantee scheme will be introduced. The scheme will operate on pooling of credit risks of such MSMEs, and a separately constituted self-financing guarantee fund will provide to each applicant a guarantee to cover up to ₹100 crore, while the loan amount may be larger.” She also announced that public sector banks will build “in-house capability” for credit assessment of MSMEs. The government will also slash the manda­tory revenue requirement for MSMEs for submitting applications on TReDS from ₹500 crore to ₹250 crore. TReDS is an electronic platform for facilitating the financing or dis­counting of trade receivables of MSMEs through multiple finan­ciers. The Budget also announced that the Small Industries Develop­ment Bank of India (SIDBI), a state-run financial institution, will open 24 new branches to serve MSME clusters. The government also an­nounced a significant hike in the Mudra loan scheme, enhancing the limit of Mudra loans to ₹20 lakh from the current ₹10 lakh for those who have availed and successfully repaid loans previously taken.

Several agencies and scholars, however, continue to be pessimistic about India’s capability to generate opportunities to meet the demand for jobs. Citigroup Inc said recently in a study by Samiran Chakraborty and Baqar Zaidi—which was reported by Bloomberg—that the country will struggle to create enough jobs for its growing workforce over the next decade even if the economy grows at a rapid pace of 7 per cent. According to the report, India must generate approximately 12 million jobs annually over the next decade to accommodate new entrants into the labour market. “However, with an anticipated growth rate of 7 per cent, the country is expected to create only 8-9 million jobs annually, as noted by economists Samiran Chakraborty and Baqar Zaidi in their recent study,” Bloomberg reported. The economists highlighted that the quality of jobs created in India remains a signif­icant challenge, it said. “Official data analysis reveals that approximately 46% of the work­force is still engaged in agriculture, despite the sector contributing less than 20% to the gross domestic product (GDP). In contrast, manu­facturing accounted for 11.4% of total employ­ment in 2023, a lower proportion compared to 2018, indicating that the sector has yet to fully recover since the pandemic,” the report added.

India’s labour ministry has countered the report, arguing that the nation has generated more than 8 crore employment opportunities from 2017-18 to 2021-22. “This translates to an average of over 2 crore employment per year, even though the world economy was hit by the Covid-19 pandemic during 2020-21 which contradicts Citigroup’s assertion of India’s inability to generate sufficient employment. This significant employment creation dem­onstrates the effectiveness of various govern­ment initiatives aimed at boosting employ­ment across sectors,” an official release said.

True, the formalisation of jobs is a work in progress in India where a lot more measures are required to meet the accelerating demand for employment opportunities and decent jobs. In that sense, this Budget offers a ray of hope.

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