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What the Union Budget tells about jobs creation

If proposals made by finance minister Nirmala Sitharaman are implemented in spirit, and investments are made, there could be employment generation in the medium to long-run across sectors such as real estate, core infrastructure and food processing

twitter-logo Goutam Das   New Delhi     Last Updated: July 6, 2019  | 00:16 IST
What the Union Budget tells about jobs creation

The Union Budget mentions the word 'jobs' just two times and 'employment' five times. But that is hardly the full story. If proposals made by finance minister Nirmala Sitharaman are implemented in spirit, and investments are made, there could be employment generation in the medium to long-run across sectors such as real estate, core infrastructure and food processing.

Here are four notable areas of jobs creation. A fifth - manufacturing - is a sector that needs to be watched considering disappointments of the past.   

Infrastructure

The Budget stressed on affordable housing and the creation of other infrastructure. Tax benefits announced on affordable housing will stimulate demand, and thereby, both construction and supply-related jobs. While interest paid on housing loans was allowed as a deduction to the extent of Rs 2 lakh earlier, the Minister proposed an additional deduction of up to Rs 1,50,000 for interest paid on loans borrowed up to March, 2020 for purchase of an affordable house valued up to Rs 45 lakh. In terms of core infrastructure, the government had earlier announced its intention to invest Rs 100 lakh crore over the next five years. The Minister said that "to this end, it is proposed to set up an expert committee to study the current situation relating to long-term finance and our past experience with development finance institutions, and recommend the structure and required flow of funds through development finance institutions". India's infrastructure investments include industrial corridors (for industrial investment), dedicated freight corridors (less congestion of railway network), Bharatmala (national road corridors and highways), and Sagarmala (port connectivity, modernization and port-linked industrialisation).

Agri infrastructure

The Minister announced the government would "support private entrepreneurships in driving value-addition to farmers' produce from the field and for those from allied activities, like Bamboo and timber from the hedges and for generating renewable energy". Dairying through cooperatives will also be encouraged by creating infrastructure for cattle feed manufacturing, milk procurement, processing and marketing. A scheme - the Pradhan Mantri Matsya Sampada Yojana - would establish a fisheries management framework to address gaps in the value chain.

FULL COVERAGE:  Union Budget 2019

Small and medium firms

SMEs can become more productive in a cluster where there are common facilities, training, and better opportunity to market. The Budget has some good news on this front. The Minister said that a 'Scheme of Fund for Upgradation and Regeneration of Traditional Industries' (SFURTI) will set up more Common Facility Centres to facilitate cluster based development that would "make the traditional industries more productive, profitable and capable for generating sustained employment opportunities". Bamboo, Honey and Khadi clusters were called out. The Minister said that SFURTI envisions setting up 100 clusters during 2019-20, which should enable 50,000 artisans to join the economic value chain. The Budget also had an announcement on the ease of doing business. "Government payments to suppliers and contractors are a major source of cash flow, especially to SMEs and MSMEs. Investment in MSMEs will receive a big boost if these delays in payment are eliminated. Government will create a payment platform for MSMEs to enable filing of bills and payment thereof on the platform itself," the Minister said.

Start-ups

Over the past five years, this is one segment that has generated both white-collar and blue-collar jobs. Possibly more blue-collar jobs if you add up the delivery executives of e-commerce and food-tech firms as well as the drivers on Ola and Uber. One vexing issue was that of 'angel tax'. The Budget, encouragingly, clarified on the way ahead: "To resolve the so-called 'angel tax' issue, start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums. The issue of establishing identity of the investor and source of his funds will be resolved by putting in place a mechanism of e-verification. With this, funds raised by start-ups will not require any kind of scrutiny from the Income Tax Department," the Minister said.

Make in India

While the government appears bullish about manufacturing and the jobs it can create, this space needs to be watched. India's manufacturing has stagnated for many years at 16-17 per cent as a percentage of the overall GDP and Industry 4.0, or the introduction of new technologies, have meant technological unemployment - most jobs will come with a very high skillset. Nevertheless, the Budget announced that the government will launch a scheme to invite global companies through a transparent competitive bidding to set up mega-manufacturing plants in sunrise and advanced technology areas such as Semi-conductor Fabrication (FAB), Solar Photo Voltaic cells, Lithium storage batteries, Solar electric charging infrastructure, Computer Servers, Laptops, etc. and provide them investment-linked income tax exemptions under section 35 AD of the Income Tax Act, and other indirect tax benefits. India has been attempting FABs, unsuccessfully, for more than a decade now. The government now wants to make India a global hub of electric vehicle manufacturing. Electric vehicles have about 20 moving parts versus more than 100 in petrol or diesel vehicles - while the sunrise EV industry can create jobs, it would also kill many traditional jobs in the auto ancillary segment.

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