'Internship Scheme a Creative Idea, May Need Fine-Tuning'

Neelkanth Mishra, Axis Bank's chief economist and part-time member of the EAC-PM, discusses the impact of new ELI schemes with Parth Singh. Edited excerpts

- Parth Singh

Can employee-linked incentive (ELI) schemes help reduce India’s unemployment burden?

The Budget this year has allocated Rs 10,000 crore in ELI schemes, and there is not much of the year left for the schemes to be rolled out and ramped up. If the schemes do well, the annual payout next year could be Rs 20,000–30,000 crore, and that is less than a tenth of 1% of India’s annual GDP [gross domestic product]. While headline targets for these schemes are around 2.5–3 crore jobs over two to four years, it is unlikely that all new jobs will be created due to these schemes.

A business which was not planning to hire would not change its mind because one month out of 12 is paid for [a guarantee of one of the ELI schemes]. But if a firm was looking to hire 12 people it might hire one more. Subsidies in the two other schemes are larger over a two-year period. But given that these are through provident fund contributions, the major push would be on turning informal workers into formal ones. Once a job starts formally, it has higher chances of staying formal.

Many sectors are complaining of a skills gap. What can the government do to address this?

The government has significantly increased budgetary allocation for ITIs [Industrial Training Institutes]. The use of CSR [corporate social responsibility] funds to sponsor internships for 1 crore youth over five years is a creative new idea, even though it might need fine-tuning.