From the Editor-in-Chief – India Today

TThe hot button issue in the recent elections, in which the NDA did not fare as well as expected, was unemployment. Finance Minister Nirmala Sitharaman took note of this and focused Budget 2024 on “employment creation”. According to a Word Cloud analysis, she mentioned the word “employment” only three times in last year’s Budget, compared to 23 times this year. Taking the bull by the horns, she announced an innovative Five-Fold Pathway targeting 41 million youth at an outlay of Rs 2 lakh crore over five years. The scale of the problem is gargantuan — the Economic Survey 2023-24 estimates India’s current workforce at 565 million. Over 45 per cent of them are employed in agriculture. They contribute just 18.2 per cent of GDP; the bulk comes from services, manufacturing and construction, with almost 55 per cent of the workforce. So only a decisive shift of labour from agriculture to more productive sectors will solve the problem of hidden/underemployment. The study estimates that India needs to generate close to 8 million jobs per year in non-farm sectors by 2030 to absorb all those ready to join the workforce. Here the problem goes beyond scale: in the face of rapidly growing demand for skilled labour, only one in two Indian college graduates is employable, according to the study. The rest are “considered unemployable” because they lack the “skills required by a modern economy”. So not only do jobs need to be created, the young workforce also needs to be prepared for a job market defined by rapid technological change and newer skill sets.

Budget 2024, by introducing significant measures to stimulate growth, goes beyond the failed paradigm of chasing job creation as a byproduct of lower corporate taxes. Instead, the Modi government has ventured into relatively uncharted territory by providing incentives directly for hiring. In doing so, it aims to achieve a triple bottom line. The five-fold jobs package focuses on raising the skill pool at one level and employment-linked incentives (ELI) for the private sector at another, while pushing the economy towards formalisation by bringing all recruits into the orbit of the Employees’ Provident Fund Organisation (EPFO).

Three of the five schemes are ELI-based. In the first, the government will pay new recruits a monthly salary, up to a maximum of Rs 15,000, in three instalments. This is to meet transport and maintenance costs. With a salary eligibility limit of Rs 1 lakh per month, it is expected to benefit 21 million youth over two years at a total cost to the exchequer of Rs 23,000 crore. The second scheme aims to stimulate job creation in the manufacturing sector, with benefits provided at specified scales to both new recruits and employers as per their EPFO ​​contribution in the first four years of employment. The expected pool of beneficiaries — 3 million youth and their employers — again gives us an idea of ​​the job creation target, at a cost to the exchequer of Rs 52,000 crore. The third scheme encourages employers across sectors to hire “additional” workers at a salary of Rs 1 lakh per month, not necessarily those who are just starting out. The government will reimburse employers up to Rs 3,000 per month for two years towards EPFO ​​contributions for each additional worker. The scheme is expected to benefit 5 million recruits at a cost of Rs 32,000 crore.

Perhaps the most ambitious employment package is the fourth scheme, which provides one-year internships in 500 top companies for 10 million youth over five years — with a monthly allowance of Rs 5,000 and a one-time assistance of Rs 6,000. Companies that volunteer are expected to foot a significant portion of the training bill from their CSR (corporate social responsibility) funds. This is a way of shifting the burden to the private sector, as many government-led professional development programmes have had little impact. The scheme will cost the government Rs 63,000 crore. In the fifth wing, the Centre has finally moved to course-correct its professional development programme by revamping 1,000 Industrial Training Institutes (ITIs) in hub-and-spoke arrangements over the next five years. The Centre will bear 50 per cent of the cost, which will entail an outlay of Rs 30,000 crore, states will contribute 33.3 per cent and corporates will come in with CSR funding. The idea is to provide state-of-the-art skill training that will benefit over 2 million youngsters over five years, while creating valuable human resources for the industry. Hopefully, the private sector will cooperate in these schemes and the bureaucracy will not create a pile of red tape around them, nor will the government rely on pressure to create participation.

Tthese plans naturally have a gestation period before they fully bear fruit. That is why the Modi government has also spread its bets. It is injecting blood into the vast universe of medium, small and micro enterprises (MSMEs) where solid absolute numbers of jobs can be generated, thanks to a new credit guarantee scheme and another formal mechanism to ensure uninterrupted credit lines. Rs 2.2 lakh crore for housing under PM Awas Yojana Urban 2.0 is expected to create a lot of new jobs in the construction sector. As a boost to start-ups, the angel tax has been waived and the Mudra loan ceiling for small entrepreneurs has been doubled to Rs 20 lakh.

On other fronts, Budget 2024 is a document of continuity and fiscal prudence. It is commendable that it has stayed the course with Modi’s dual focus on infrastructure and social welfare, while keeping the fiscal deficit within acceptable bounds. The income tax breaks, though small, give hope that they can revive consumer demand and ultimately employment. Given the emphasis on jobs for the youth, our stimulus package is titled the ‘Next Generation Budget’. However, there are a few missing elements. The disinvestment and asset monetisation plan has a glaring lack of continuity. It seems to have fallen off the radar, perhaps due to coalition constraints or fear of a vigorous attack by the Opposition. In any case, as expected, the government has been criticised by the Opposition for the special concessions given to BJP alliance partners from Bihar and Andhra Pradesh. Tourism, an obvious sector to develop for both unskilled and skilled jobs, gets only a passing nod, with ideas based on pilgrimages for Bihar.

Overall, it is a welcome budget as it does not have any shocks that could disrupt India’s impressive GDP growth trajectory. Moreover, it has not pandered to unwarranted populism. Most importantly, it has taken a long-term view of developing our vast human capital without which there can be no Viksit Bharat.

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