NEW DELHI: Two major schemes aimed at giving a boost to the economy’s growth potential and its employment intensity were approved by the Cabinet on Tuesday. It gave the nod to a Rs 1 lakh crore scheme to support research & development and innovation (RDI) in sunrise domains and finance-technology projects. The intent also is to facilitate acquisition of technology and set up deep-tech fund of funds. Besides, the Cabinet also approved an employment-linked incentive (ELI) scheme worth Rs 99,446 crore to support jobs generation and improve employability across different sectors, with a special focus on the manufacturing sector. Divided into two parts, the ELI scheme will benefit the professionals who are planning to enter the workforce in addition to the existing employees.
Through the scheme, first announced by the finance minister Nirmala Sitharaman in FY25 Budget, the government aims to incentivise the creation of over 35 million jobs over a two-year period. Out of these, 19.2 million beneficiaries will be first time employees. These benefits will be applicable on jobs created by organisations between August 2025 and July 2027.
The RDI funds will be allocated from the Union budget as a 50-year interest-free loan to the the Anusandhan National Research Foundation (ANRF), which will be leveraged for multiplier effect. The scheme is expected to run for several years, and play a key catalytic role for augmenting domestic R&D, which is crucial for technology assimilation for the manufacturing industry and improving overall economic productivity.
Recognising the critical role that the private sector could play in driving innovation and commercialising research the RDI Scheme aims to provide long-term financing or refinancing with long tenors at low or nil interest rates, the government said in a statement.
The Governing Board of thee ANRF, chaired by the prime minister, will provide overarching strategic direction to the scheme, whereas an executive council (EC) will approve the scheme’s guidelines, and recommend second level fund managers and scope and type of projects in sunrise sectors.
The RDI Scheme will have a two-tiered funding mechanism. At the first level, there will be a special purpose fund (SPF) established within the ANRF, which will act as the custodian of funds. From the SPF funds shall be allocated to a variety of second level fund managers.
This will be mainly in the form of long-term concessional loans. The funding to R&D projects by the second level fund managers would normally be in the form of long-term loan at low or nil interest rates, the government said.
Financing in the form of equity may also be done, especially in case of startups. Contribution to deep-tech fund of funds (FoF) or any other FoF meant for RDI may also be considered.
The scheme has been designed to overcome the challenges in R&D funding in the private sector and seeks to provide growth and risk capital to sunrise and strategic sectors to facilitate innovation, promote adoption of technology and enhance competitiveness, the government said.
Among the key objectives of the scheme is to encourage the private sector to scale up RDI in sunrise domains and in other sectors relevant for economic security, strategic purpose, and self-reliance.
As per the ELI scheme, a wage subsidy of up to one month’s wage – subject to a maximum amount of Rs 15,000 – will be given to the first-time employees registered with the EPFO. The incentive will be paid in two installments (after 6 months and 12 months) to the first-time employees earning up to Rs 1 lakh per month. To encourage the habit of saving in these professionals, the government will transfer a portion of the incentive in a savings instrument of the deposit account for a fixed period which can be withdrawn by the employee at a later date.
“The first-timers face a lot of difficulties while seeking jobs. We have seen that the experienced professionals are given preference in the job market. This scheme will encourage employers to hire first-timers,” said railways minister Ashwini Vaishnaw.
The second part of the scheme will help generate additional employment of 26 million across sectors. Under this, the government will incentivise EPFO-registered employers – up to Rs 3,000 per month per employee – for each additional employee hired over a two-year period. For the manufacturing sector though, the incentives will be provided for four years.
Employers who hire additional employees above a baseline will be eligible for the scheme. For instance, if an organisation with less than 50 employees hire two more employees, it will be eligible for the government’s support. For organisations with over 50 employees, hiring a minimum of five employees will make them eligible.
“This part of the scheme has three slabs. The payment will be given after every six months so that there will be a sustained employment. The sustained employment has several benefits, including improvement in skillset, and certainty in the mindset of the employees,” Vaishnaw said adding that the scheme was prepared after extensive consultation with the industry and stakeholders over a seven-month period.
The payments to the first-time employees will be made through direct benefit transfer mode using Aadhar Bridge Payment System (ABPS) whereas the payments to the employers will be made directly into their PAN-linked accounts.
“It signals strong intent to tackle youth unemployment and strengthen workforce participation. The structure of dual incentives for both employers and jobseekers is pragmatic and timely. For staffing companies, this opens up massive potential – not only to match talent with demand but also to drive skilling, compliance, and formalisation at scale,” said Kartik Narayan, CEO (staffing) at TeamLease Services.
“This forward-thinking initiative streamlines the previous framework into two impactful schemes aimed at driving job creation and supporting first-time employees. This scheme marks a significant milestone in the journey towards a more robust and inclusive workforce,” said Puneet Gupta, Tax partner, EY India.
Source: The Financial Express
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