Key Points

The business executives and policy experts believe that the scheme will transform the employment landscape, as it focuses on formalising the workforce, empowering first-time job seekers, and reducing hiring costs for employers--especially in labour-intensive and capital-constrained sectors.

Many have compared its potential impact to that of the Production Linked Incentive (PLI) scheme, calling it a "game-changer" for youth employment, regional development, and growth of MSMEs.

The Union Cabinet on Tuesday approved the much-anticipated Employment Linked Incentive (ELI) Scheme, aimed at generating over 3.5 crore jobs and providing a major boost to formal employment, particularly in labour-intensive sectors such as manufacturing, textiles, tourism, and construction.

Welcoming the move, Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII), said, "ELI is a significant step towards boosting employment and formalising India's workforce. The ELI scheme opens doors for first-time job seekers, empowering them to contribute meaningfully to India's growth story. It empowers employers to expand their workforce and gives a decisive push to India's labour-intensive sectors."

With an outlay of Rs 99446 crore, the ELI Scheme will support the creation of over 3.5 crore jobs.

Sumita Dawra, former Secretary, Ministry of Labour & Employment, said that the scheme has been prepared with a lot of consultation with industry, trade unions, more than 25 ministries of the government of India, with all the state governments, and with the regional workshops, which were done in the states to consult the industry there and the officers.

"PM was very clear that the scheme should be simple and effective so that the real benefit of the scheme reaches the youth of the country, particularly the first-timers who are entering the workforce, and also it serves as an incentive for employment generation, particularly in the manufacturing sector... More than 3.5 crore jobs are expected as a result of the scheme," she said.

Subhrakant Panda, Managing Director of IMFA, said, "The scheme will drive employment, especially in the manufacturing sector, by taking an innovative approach that provides support to those entering the workforce for the first time with incentives for sustained employment. This will be a game changer for the labour-intensive industries and MSMEs."

Dr Ranjeet Mehta, CEO and Secretary General of PHD Chamber of Commerce and Industry (PHDCCI), said the scheme comes at a time when India's youth population is at its peak.

"This announcement by the government is very important, as India has the world's largest youth population. We have a demographic dividend and having this kind of scheme will definitely create employment for our youth population. Secondly, it also incentivises industries, especially the MSMEs who are always very short on capital."

"So giving this kind of a scheme and reimbursing the cost for one year will definitely reduce the cost of the employment at the same time, this will also focus on regional development," he added.

For businesses, the scheme also offers direct wage and hiring-related incentives. Raghunandan Saraf, Founder and CEO of Saraf Furniture, noted the dual benefits for employers and employees.

"The scheme is actually intended to give more opportunities to the employees who are struggling to find jobs or find employment. So this is going to be a good boost to the current employment market as well... It also helps the employees in retaining the employees. This is going to lower the attrition rate as well; it's also going to increase savings for the employees," he added.

Saraf further added, "Employers are also set to receive some incentive based on this, a nominal amount. So that incentive is just to make sure that employers are also on board with the scheme... One larger benefit is that the attrition rate will be lower now. since the incentive is to be distributed after six months and then after 12 months. So that means the attrition rate will be lower and at the same time, employers will also receive some incentive."

Under the Scheme, while the first-time employees will get one month's wage up to Rs 15,000, the employers will be given incentives for a period of two years for generating additional employment.

The ELI Scheme was announced in the Union Budget 2024-25 as part of the PM's package of five schemes to facilitate employment, skilling and other opportunities for 4.1 Crore youth with a total budget outlay of Rs 2 Lakh Crore.

- ANI