Govt banks on youth, women and upskilling programmes to solve job crisis

Mumbai: A key focus of the Union budget is generating employment, and bringing large sections of the young workforce from the informal to the formal sector is one of the government’s goals. The Union budget has allocated ₹1.48 lakh crore for education, employment and skilling to alleviate concerns over unemployment, by rolling out schemes aimed at bringing youth, women and skilled workers into the labour force.

“I am happy to announce the Prime Minister’s package of five schemes and initiatives to facilitate employment, skilling and other opportunities for 4.1 crore youth over a five-year period with a central outlay of ₹2 lakh crore… This year, I have made a provision of ₹1.48 lakh crore for education, employment and skilling,” finance minister Nirmala Sitharaman said on Tuesday.

A key proposal is an employment-linked incentive scheme, which will give a month’s wages to all employees entering the workforce in all formal sectors. “The direct benefit transfer of one month’s salary in three instalments to first-time employees, as registered in the EPFO, will be up to ₹15,000. The eligibility limit will be a salary of ₹1 lakh per month. The scheme is expected to benefit 2.1 crore youth,” the minister said.

The Employees’ Provident Fund Organisation (EPFO) has seen a consistent rise in new EPF subscribers aged 18-28 since the pandemic. Yearly net payroll additions to the EPFO more than doubled from 6.11 million in FY19 to 13.15 million in FY24.

“The employment incentive scheme where ₹15,000 will be given over three months is a boost to get workforce to shift from the informal to the formal sector,” said Guruprasad Srinivasan, CEO of Quess Corp. In the formal sector, employees get provident fund, labour welfare funds and have access to other benefits. “The scheme will also help MSMEs which hire a large number of informal workers to recruit from the more formal sector,” Srinivasan added.

Recruiters in the staffing sector noted that the split of ₹15,000 over three months will prevent many employees from taking the benefit in the first month and leaving their jobs.

The budget provisioned an incentive on a specified scale to be given directly both to the employee and the employer with respect to their EPFO contribution in the first four years of employment. The scheme is expected to benefit three million youth entering employment, and their employers. The government will also reimburse employers up to ₹3,000 per month for two years towards their EPFO contribution for each additional employee.

“Credit of one month’s salary in the EPFO account for first-time employees may also impact the gig economy given that this incentive is applicable to the formal employment sector,” noted Anshul Prakash, partner, employment labour & benefits at law firm Khaitan & Co.

Over the last few years, the gig workforce has gained prominence both in skilled and unskilled employment. In the Economic Survey, the government had noted that their strength is expected to expand to 23.5 million by 2029-30. “Gig workers are expected to form 6.7% of the non-agricultural workforce, or 4.1% of the total livelihood in India, by 2029–30,” it had said.

Bridging the Skill Gap

The other prominent aspect to mitigate unemployment levels is to reduce the gap in skill sets across sectors. The FM announced a centrally sponsored scheme for skilling in collaboration with state governments and industry, under which two million youth will be skilled over a five-year period.

Atul Soneja, chief operating officer, Tech Mahindra, said these programmes “align with the industry’s increasing demand for a workforce equipped with contemporary skills”, especially in tier 2 and 3 cities, which “are emerging as talent hubs and will contribute to long-term growth and the creation of local employment opportunities”.

The budget highlighted that the Model Skill Loan Scheme will be revised to facilitate loans of up to ₹7.5 lakh with a guarantee from a government promoted fund. This is expected to help 25,000 students every year.

“The financial support for loans up to ₹10 lakh for higher education and skilling loans up to ₹7.5 lakh will significantly enhance access to education and skill development, covering 100,000 students every year. This will make the lending space more competitive than before, especially for NBFCs,” said Akshay Chaturvedi, founder of edtech firm Leverage Edu, which also has an NBFC.

In a first-of-its-kind initiative, the government will roll out a scheme to upskill 10 million youth in top 500 companies over the next five years. These interns will be paid ₹5,000 a month along with a one-time assistance of ₹6,000. The government said companies can use their CSR funds to account for 10% of the internship costs, and training expenses.

“Cross-sector collaboration can address the rapidly growing skills gap and social inequities, ensuring students transition smoothly into high-demand job roles. Businesses will also benefit from a diverse and skilled talent pool, reducing recruitment time and costs,” said Raghav Gupta, managing director, APAC and India, Coursera.

The internship programmes are expected to help in bridging skillset gaps, which apprenticeship programmes and vocational training courses often fail to do.

Women who dropped out of the workforce in large numbers during the pandemic, were on the radar this budget. The finance minister set aside ₹3 trillion towards schemes aimed at benefiting women and girls, in an attempt to increase the participation of women in the workforce, and raise their contribution to economic development.

“We will facilitate higher participation of women in the workforce through setting up of working women’s hostels in collaboration with industry, and establishing creches,” the minister said.

The lack of childcare facilities prevents many new mothers from returning to the workforce, while the absence of safe residential facilities deters many others from signing up for jobs in distant places.

“The government’s focus on increasing women’s workforce participation is encouraging,” said Vinayak Pai, managing director and chief executive officer of Tata Projects Ltd.