The Employment-Linked Incentives (ELI) scheme, announced in the Union Budget 2024-25, is an innovative initiative by the Indian government intended at addressing the country’s increasing employment challenges. As India tackles high levels of youth unemployment, underemployment and a mismatch between skills and industry demands, the ELI scheme emphasises on stimulating the private sector participation in job creation and workforce development. The scheme seeks to motivate employers to hire more labour, precisely freshers, while also encouraging skill development and job retention.
The ELI initiative includes three notable programmes initiated to provide financial assistance to employers and employees. These programmes target various sectors, including manufacturing, and support the establishment of formal, high-quality jobs. By recommending subsidies for new hires, as well as rewards for job retention and upskilling, the scheme aims to create an inclusive and robust labour market. With a projected central allocation of Rs. 2 lakh crore (US$ 23.70 billion) for 2024-2029, the scheme is an integral component of the government’s broader efforts to foster sustainable economic growth, decrease inequality, and ensure that India’s youth is equipped with the skills and opportunities essential to thrive in an evolving job market.
The ELI scheme aims to address India’s employment crisis by incentivising the private sector for job creation, retention and skill development. The objectives of the scheme are:
The Employment-Linked Incentive programme encompasses five schemes aimed at employment generation, workforce formalisation, skill development and enhancing industry compliance. Below is a detailed overview of each scheme:
Scheme A: Support for First-Time Employees
This scheme targets individuals entering the formal workforce for the first time and is facilitated through the Employees’ Provident Fund Organisation (EPFO). Key benefits include:
Scheme B: Incentivising Job Creation in Manufacturing
Designed to foster employment in the manufacturing sector, this scheme rewards employers and first-time employees who contribute to the EPFO:
Scheme C: Employer Support for EPFO Contributions
This scheme offers financial relief to employers by reimbursing part of their EPFO contributions:
Scheme D: Skilling Programme with State and Industry Collaboration
A new centrally sponsored scheme to skill 20 lakh youth, enhancing employability and meeting industry needs:
Scheme E: Internship Programme with Top Companies
This programme provides hands-on experience for one crore youth by enabling internships with leading companies:
Additional Reforms for Labour Welfare and Industry Compliance:
Each scheme has been designed with targeted durations and substantial financial support to maximise benefits for specific segments within the formal workforce.
Collectively, the central outlay for these schemes amounts to Rs. 1,07,000 crore (US$ 12.68 billion), with a combined estimated beneficiary base of 2.9 crore individuals. These initiatives emphasise a comprehensive approach to workforce formalisation, manufacturing growth and employer support, fostering job creation and sustained employment opportunities across the formal sector.
The Employment-Linked Incentive (ELI) schemes offer several key benefits, particularly in terms of enhancing employment opportunities and supporting employers and employees:
In conclusion, the introduction of the Employment-Linked Incentive (ELI) schemes highlights the government's strategic approach to addressing unemployment while driving economic growth. By offering targeted incentives to employees and employers, these schemes aim to create a more inclusive and dynamic job market. The ELI initiatives not only support workforce expansion and formalisation but also provide significant financial relief to employers, particularly SMEs, making it easy for them to grow and hire. As the details of these schemes unfold, stakeholders in the manufacturing sector are eager to explore how these incentives can be effectively utilised to foster industrial growth and job creation, ensuring a thriving and sustainable economy in the long term.