A Critical Analysis of Employment Generation Measures in Budget 2024-25

Source-This post on A Critical Analysis of Employment Generation Measures in Budget 2024-25 has been created based on the article “The government’s job creation plans reveal a flawed approach” published in “Live Mint” on 9 August 2024.

UPSC Syllabus-GS Paper-3- Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context -The recent budget acknowledges the urgent need for job creation in India, but the proposed measures are insufficient to effectively address the problem.

What are the employment schemes announced in the budget?

The budget announced a ₹2 trillion package aimed at creating 41 million jobs over the next five years, including:

1) Employment and Skilling Schemes:

A) Scheme 1:- New employees receive ₹15,000 in three instalments, with the condition that they must complete an online financial literacy program to get the second month’s payment, and employers must return the subsidy if the employee leaves within a year.

B) Scheme 2:- Incentives for the manufacturing sector include graded payments over four years, with eligibility requiring enterprises to hire at least 50 new workers or 25% of their existing workforce and to have a three-year track record of EPFO contributions.

C) Scheme 3:– A government subsidy of ₹3,000 per month towards the employer’s provident fund contribution applies to enterprises with a track record of EPFO contributions, following similar criteria as Scheme 2.

2) Additional Schemes:

A) One scheme for internships– Targets youth aged 21-24 who are unemployed and not pursuing education

B) One scheme for upgrading ITIs (Industrial Training Institutes).

A detailed article on Budget 2024-25 can be read here.

What are the issues with these schemes and the government’s approach to addressing the unemployment crisis?

1) Eligibility-All three schemes are for enterprises registered with the Employees’ Provident Fund Organization (EPFO), thus targeting only the organized sector.

2) Administrative Burdens: – Requirements like financial literacy programs and the need for a three-year track record of EPFO contributions may place undue financial and administrative burdens on employers, this may undermine the schemes’ effectiveness.

3) Internship Scheme: – The scheme excludes students from top institutions or those with professional qualifications and bars those with family members who are taxpayers or government employees. These strict conditions may limit the schemes’ effectiveness and impact.

4) Over-Reliance on the Private Sector -The main issue with the budget is its heavy reliance on the private sector for job creation. Despite substantial tax subsidies in 2019, these funds mostly boosted corporate profits instead of creating jobs.

5) Misalignment of Job Creation with Economic Growth -The budget wrongly separates job creation from economic growth. Jobs are mainly created through growth and investment. In times of low demand and stagnant incomes, it’s unrealistic to expect the private sector to create jobs without broader economic stimulus.

What should be the way forward?

1) The government should focus on creating decent, well-paid jobs, not just increasing job numbers. By boosting public spending in rural areas and the informal sector, it can raise incomes and create more labor-intensive jobs.

2) Investing in education, health, and public services will fix key gaps, boost worker productivity, and help marginalized groups who may not benefit from existing budget schemes.

Question for practice

What are the issues with these schemes and the government’s approach to addressing the unemployment crisis?