NEW DELHI: The government may introduce an employment-linked incentive scheme (ELIS) for companies in the Budget 2024-25 in a bid to promote job creation. The provisions of the ELIS would be similar to that of the production-linked incentive (PLI) scheme and it would be applicable to a few labour-intensive sectors, sources said.
The labour ministry is learnt to have recommended the scheme to the finance ministry earlier this month. According to sources, the scheme would apply to sectors such as toys, textiles & apparels, furniture, tourism, logistics etc.
Though the exact nature of the incentives to be provided could not be ascertained, sources indicated that these must include tax relief to corporations for adding new workers and provide wage subsidies for any additional jobs created for a limited period of time.
Experts say that by offering financial assistance to labour-intensive sectors, the proposed incentive scheme can bring about a paradigm shift in the employment scenario and result in increased production. “This may incentivise companies to invest in expanding their workforce, ultimately lowering unemployment rates and boosting overall economic production,” said Akhil Arora, partner, Grant Thornton Bharat.
The Narendra Modi-led National Democratic Alliance government is facing criticism for a “job crisis” in the economy, with several reports suggesting that India’s growth has in recent years has been a “jobless” one.
A recent study by the International Labour Organisation (ILO) had noted that while the gross value added (GVA) grew at an annual average rate of 6.7% between 2012 and 2019, the employment growth “was nearly negligible at 0.01%.” This was even worse than in the period between 2000 and 2012 when the GVA grew 6.2% and employment 1.6%.
Lohit Bhatia, president, Indian Staffing Federation (ISF) said that the government must prioritise formal employment generation in the coming years, focusing on schemes that integrate social security and benefits.
One of the primary focus should be schemes for formal employment in the MSME sector with EPFO and ESIC coverage as the majority of Indians working in MSME are not covered for social security due to eligibility limits in these schemes. “For this, support should also be given to the employer for covering employees with EPF and ESIC,” said Bhatia.
Moreover, for first-time formal employment under social security, especially for women, higher income tax benefits up to `50,000 per month under Section 80JJAA should be provided to employers, suggested the ISF. The section, at present, allows eligible enterprises to claim deductions against additional staff costs during a particular fiscal. It allows a deduction of 30% on employee recruitment costs incurred for three consecutive assessment years, provided the employee shouldn’t earn more than `25,000 per month.
Shreevardhan Sinha, senior partner, Desai & Diwanji said that the government would do well to provide indirect financial incentives such as lower statutory contributions, grants for capital investments that lead to job creation and low-interest loans for labour-intensive businesses. Also, non-financial incentives such as reducing regulatory burdens, subsidising skill development programmes, can be provided, Sinha said.
Source: The Financial Express
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