Union Budget 2024: Job creation incentives to be in focus in full budget

With unemployment and job creation a burning issue, a proposal for an employment-linked incentive (ELI) scheme has been mooted for certain labour-intensive sectors.

While the proposal was originally mooted by the Congress party as part of its manifesto for the General Elections 2024, it has since then also been taken up by industry chambers and economists in pre-Budget discussions.

According to sources, an ELI scheme would be on the lines of the production-linked incentive scheme that has been rolled out for 14 sectors. The ELI would instead focus on labour intensive sectors where micro, small and medium enterprises are more at play. These could be sectors such as toys, leather goods and apparel. The objective would be to increase employment and create jobs while giving a boost to domestic industry, especially the MSME sector.

“Create a new ELI scheme for corporates to win tax credits for additional hiring against regular, quality jobs,” the Congress party’s manifesto had said.

CII in pre-Budget consultations with the revenue secretary had called for an ELI scheme for labour intensive sectors with high growth potential with incentives linked to employment generation based on appropriate outcome indicators.

Sources said one of the options being considered for this is to either expand the scope of the existing PLI scheme to more sectors or alternatively to create a separate class of ELI scheme. A decision on this could be possibly announced in the Union Budget 2024-25 that will be presented by Finance Minister Nirmala Sitharaman on July 23.

Economists and analysts also believe that job creation will be one of the focus areas of the Union Budget with some support to be announced either through the PLI or a separate scheme. “Support to labour-intensive manufacturing sectors such as toy, textiles, apparel, leather through fiscal incentives via PLI scheme could continue with mild enhancements. In addition, there is a likelihood of finetuning of the PLI scheme with inclusion of job creation as a key performance indicator,” said a report by QuantEco Research.  

HSBC economists Pranjul Bhandari and Priya Mehrishi in a recent report also noted that the Budget could have a PLI for job intensive sectors. “Efforts to remove bottlenecks in the several sectors for which the PLI scheme has been announced may come to the forefront. In particular, we expect focus on the more mid-tech jobs-intensive sectors like textiles and food processing. Incentives for other jobs intensive sectors like toys could also be announced,” they said in a report on India Budget and RBI preview.

Unemployment has been an issue of debate in recent weeks with concerns being raised over not enough jobs being created for India’s workforce.

However, the labour ministry has said that India has generated more than 8 crore (80 million) employment opportunities from 2017-18 to 2021-22 citing the Periodic Labour Force Survey and RBI’s KLEMS data. “This translates to an average of over 2 crore (20 million) employment per year, despite of the fact that the world economy was hit by Covid-19 pandemic during 2020-21,” it had said in a recent statement.