Union Cabinet Approves Employment Scheme

The Union Cabinet of India has approved the Employment Linked Incentive (ELI) scheme aimed at boosting employment generation, particularly in the manufacturing sector, with a focus on formal job creation. The ELI scheme was announced in the Union Budget for 2024-25 presented by Finance Minister Nirmala Sitharaman, and it has an extensive outlay of ₹99,446 crore. The main objective of the initiative is to create 3.5 crore jobs over a period of two years, from August 1, 2025, to July 31, 2027.

Key Features of the ELI Scheme:

• Target Audience: The scheme targets first-time job seekers and aims to enhance employability and social security across various sectors, with a primary focus on manufacturing.

• Components of the Scheme:

  • Part A: Designed for first-time employees, offering a wage subsidy equivalent to up to one month’s salary, capped at ₹15,000. Approximately 1.92 crore individuals are expected to benefit under this part. Employees earning up to ₹1 lakh are eligible, receiving:

    • The first installment after six months of service.
    • The second installment after 12 months of service, contingent on completing a financial literacy program.
    • A portion of the incentive will be deposited into a savings account format to encourage savings, available for withdrawal later.

  • Part B: Focused on generating additional employment across all sectors, particularly manufacturing. Employers can receive various incentives based on the wage scale of additional employees hired:

    • For employees with salaries up to ₹10,000: ₹1,000/month.
    • For salaries over ₹10,000 and up to ₹20,000: ₹2,000/month.
    • For salaries above ₹20,000 (up to ₹1 lakh/month): ₹3,000/month.
    • Employers, depending on their size, are required to hire a minimum of either two or five additional employees on a sustained basis for at least six months to qualify for incentives.

• Financial Transfer Mechanism:

  • Payments under Part A for first-time employees will be processed through Direct Benefit Transfer (DBT) to ensure efficiency.
  • Employers will receive payments under Part B directly into their PAN-linked accounts.

• Background and Context: The ELI scheme is part of the larger Prime Minister's Package for Employment and Skilling, which has a total budgetary allocation of ₹2 lakh crore for various employment initiatives. It reflects India’s initiative to address job creation in the face of economic challenges.

This initiative underscores the government's commitment to improving employment prospects and economic opportunities for young entrants to the workforce, particularly through targeted incentives in the manufacturing sector, which is critical to the country's economic framework.

Summary Points:

• The Union Cabinet approved the ELI scheme with a budget of ₹99,446 crore.
• Aims to create 3.5 crore jobs within two years from August 2025 to July 2027.
• Focuses on formal employment, particularly in the manufacturing sector.
• Part A: Wage subsidy for first-time employees up to ₹15,000 for new entrants.
• Part B: Incentives for employers hiring additional staff, ranging from ₹1,000 to ₹3,000/month based on salary brackets.
• Emphasizes Direct Benefit Transfer (DBT) for payments to promote transparency.
• Part of the broader ₹2 lakh crore Prime Minister's Package for Employment and Skilling.
• Aimed at enhancing employability, social security, and economic development in India.