A double-edged sword

On July 1, 2025, the Union Cabinet approved the Employment-Linked Incentive (ELI) scheme, allocating 99,446 crore to spur job creation to generate up to 35 million jobs over the next two years.

- BY SHIVANAND PANDIT (GOA)

This initiative underscores the need for India's economic growth to translate into meaningful employment opportunities. According to the latest Periodic Labour Force Survey monthly bulletin, female labour force participation remains low at 33.2%, well below the global average, while youth unemployment among those aged 15-29 is at 15%, compared to the overall unemployment rate of 5.6%. Furthermore, most workers are still employed in the informal sector, which generally offers low wages.

Globally, wage-linked incentive schemes have been successful in boosting employment. Germany, for example, offers employer subsidies for apprenticeships and long-term hires, while South Korea provides targeted wage support to encourage the employment of both young and older workers. Singapore links financial assistance to skills development and employee retention, and the United States incentivises the hiring of disadvantaged groups through the Work Opportunity Tax Credit. India's ELI scheme builds on these international best practices, adapting them to local conditions such as a large informal workforce, a favourable demographic dividend, and a growing digital infrastructure.

What is the ELI Scheme?

The scheme aims to promote employment generation, improve employability, and strengthen social security across all sectors, with a particular emphasis on manufacturing. Announced in the Union Budget 2024-25 as part of the Prime Minister's package of five initiatives, it seeks to create employment, skilling, and other opportunities for 4.1 crore youth, with a total allocation of 2 lakh crore.

Under the scheme, first-time employees will receive one month's wage (up to 15,000), while employers will be provided incentives for two years for generating additional employment. For the manufacturing sector, these benefits will be extended for an additional two years. The scheme will apply to jobs created between August 1, 2025, and July 31, 2027.