Government’s new announcements for the labor market

Source: The post government’s new announcements for the labor market has been created, based on the article “Govts have limited impact on jobs: Policy reforms would work better than programmes or projects” published in “Business standard” on 24th July 2024

UPSC Syllabus Topic: GS Paper3- Economy- Employment

Context: The article discusses how government programs aimed at improving the labor market may not be effective. It suggests that policy improvements to create a better business environment are more impactful than direct interventions, like forced internship programs or fiscal subsidies.

For detailed information on India’s labor market read Article 1, Article 2

What are the Government’s new announcements for the labor market?

1. The government announced new programs to improve the labor market.
2. One key initiative is an internship program in the top 500 companies, aiming to process 10 million interns over five years. The program will provide ₹60,000 per intern per year, funded by the government and corporate social responsibility (CSR) contributions.
3. Voluntary Participation: Companies’ involvement is voluntary.
4. Centralized Portal: Establishment of a centralized online portal for applications.
5. Eligibility: Numerous rules about applicant eligibility will be defined.

What are the criticisms of this announcement?

1. Limited Impact: The program aims to process 10 million interns over five years, which is a small number compared to the needs of the Indian labor market.
2. Voluntary Participation: The sentence “Participation of companies is voluntary” highlights that companies already have internship programs and may find centralized portals and subsidy processes daunting.
3. Potential Coercion: Concerns arise that the voluntary nature might turn into coercion, deterring investment and leading to increased bureaucratic control.
4. Inefficiency of Direct Intervention: Direct fiscal interventions, like the Production-Linked Incentive (PLI) scheme, are costly. For instance, a 5% PLI on $1 trillion exports would cost $50 billion.
5. Historical Context: Economic growth from 1991 to 2011 was driven by policy improvements, reducing customs duties, and ensuring rule of law, rather than direct government intervention.

Way forward

Policymakers should focus on improving the environment for private investment. This involves reducing policy-related barriers and ensuring stable, long-term policies. Direct interventions, like the internship program or PLI, are less effective than creating conditions where private firms want to invest.

Question for practice:

Discuss the criticisms of the government’s new internship program for improving the labor market in India.