Current State of Employment in India

Current State of Employment in India

Sub: Eco

Sec: Inflation and unemployment

The Union Budget for 2024-25 places a strong emphasis on employment, highlighting several initiatives aimed at addressing job creation and unemployment.

• Workforce Composition: As of 2022-23, India’s workforce is approximately 56.5 crore, with 45% in agriculture, 11.4% in manufacturing, 28.9% in services, and 13% in construction.
• Unemployment Rate: The official unemployment rate was 3.2%, but this figure may not fully capture underemployment and the large number of people in informal sectors.
• Urban and Youth Unemployment: Urban unemployment was 6.7%, and youth unemployment stood at 10%.
• Salaried Workers: The proportion of regular salaried workers decreased from 22.8% in 2017-18 to 20.9%, with many lacking formal contracts or social security benefits.

Budget Schemes for Employment Generation

• First-Time Employee Subsidy:
  • Provides a wage subsidy of up to ₹15,000 for hiring first-time employees, paid in three instalments, covering up to one crore people.
• Manufacturing Sector Incentives:
  • Offers wage subsidies for hiring in the manufacturing sector, with up to 24% of a ₹25,000 monthly wage covered for four years.
• Employer Subsidies for New Hires:
  • Reimburses employers up to ₹3,000 of their monthly EPFO contribution for hiring new workers.
• Industrial Training and Skilling:
  • Plans to upgrade Industrial Training Institutes and enhance skilling efforts, benefiting approximately 20 lakh students.
• On-the-Job Skilling:
  • Aims to provide internships to one crore youth with a monthly allowance of ₹5,000, with companies bearing training costs and 10% of the allowance.

Expert Opinions and Challenges

• Implementation Challenges: Experts point out that the conditions and procedures for these schemes may hinder effective implementation, such as requiring financial literacy courses for employees to receive subsidies.
• Structural Constraints: Economists argue that the primary issue isn’t high wage costs but insufficient demand and lack of private investment. They suggest focusing on stimulating demand by raising wages and investing in the MSME sector.
• MSME Sector Focus: There is a call for more targeted support for MSMEs and labour-intensive sectors, which can have a multiplier effect on job creation.

Recommendations for Job Creation

• Increase Wages in Key Sectors: Raising wages in the MSME sector and labour-intensive industries can stimulate demand and consumption.
• Enhance Employment Guarantee Schemes: Expanding schemes like MGNREGA and creating similar programs for urban workers could provide direct support and boost consumption.
• Focus on Formalizing Employment: Creating formal jobs and ensuring social security benefits are crucial for absorbing the workforce exiting agriculture and informal sectors.