Why in the news?

The introduction of the new ELI scheme for corporates by the Narendra Modi government acknowledges the disconnect between GDP growth and job creation.

About Employment Linked Incentives (ELI)

• The ELI scheme aims to encourage companies to hire more employees by providing financial incentives for each new hire.
• Target Sectors: The scheme is expected to focus on labour-intensive sectors such as toys, textiles, apparel, furniture, tourism, and logistics, which have significant potential for job creation.
• Incentives Offered: Financial incentives may include tax relief and wage subsidies for new jobs created, along with non-financial incentives like reduced regulatory burdens and support for skill development programs.

Government’s Failure of Initiatives

• Previous Economic Strategies: Over the past decade, the Indian government relied on traditional economic models, such as the trickle-down approach and production-linked incentives (PLI), which did not yield the expected job growth.
  • Initiatives like “Make in India” and corporate tax cuts aimed to stimulate investment but failed to translate into significant employment opportunities.
• Jobless Growth: Despite policies designed to boost production, employment growth has been stagnant, with a study indicating a negligible employment growth rate of just 0.01%.

Issue of Job and Ideas Deficit

• Jobs Deficit: The lack of job creation has prompted proposals like reserving jobs for locals, reflecting political pressures in a democracy where job scarcity is prevalent.
• Ideas Deficit: Economists often suggest reforms in labour, education, and business practices as solutions to job creation, but these are complex and difficult to implement.
• Unemployment Trends: The unemployment rate has shown fluctuations, with a reported decline from 6.0% in 2017-18 to 3.2% in 2022-23. 

What can be done?

• Policy Shift: The ELI scheme represents a significant policy shift towards prioritizing job creation over mere economic output. By encouraging firms to hire rather than invest solely in automation, it aims to address the capital-labour imbalance in the economy.
• Support for MSMEs: Special focus on micro, small, and medium enterprises (MSMEs) is crucial, as they employ a substantial portion of the workforce.
• Alignment of Goals: Need to Collaborate among various ministries, particularly finance, skill development, and labour, is essential to ensure that skill development aligns with industry needs, enhancing employability and job creation

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