India should consider a jobs-linked incentive scheme

Employees Provident Fund Organisation (EPFO) data shows that around 12-13 million formal jobs are added every year. This is good news. On the other hand, data from the Centre for Monitoring Indian Economy reveals an unemployment rate that has ranged from 7.2% to 9% this year.

- MADAN SABNAVIS

National Sample Survey Office (NSSO) data on unemployment (weekly status) has shown that joblessness on a quarterly basis has been in a range of 6.5% to 6.7%. We have thus had mixed signals.

In the Union budget for 2024-25, the government introduced an employment-linked scheme (ELI) under which allocations were made for payments to first-time employees in the form of wages or provident fund contributions on their behalf for two years. The government has also begun an internship scheme in top companies. But could there be a direct way of incentivizing companies to increase their headcount?

The central and state governments provide the policies and physical and financial infrastructure that let the private sector drive growth. Private companies always look at productivity and profit when planning an employment matrix, as the salary of any person taken on the rolls is seen as a fixed cost, to be borne regardless of output. After Covid, the temptation to employ more technology to substitute human jobs has been high. With artificial intelligence (AI) gaining currency, there is palpable fear of a further slide in demand for human beings. The concept of having a stock of employees on the bench is outdated even in the information technology (IT) sector, where hiring now follows the tenet of 'just in time'.