Policy Update
Ishita Deb
Background
A comprehensive strategy was introduced in the Union Budget 2024 to tackle youth unemployment in India, driven by the country’s high unemployment rate and increasing economic pressures. One of the key concerns is that a significant portion of graduates from top institutions remain unemployed, as highlighted by the India Today news article that 38% of IIT graduates across 23 campuses were still unemployed in 2024.
The policies aim to address this issue by providing education and skilling opportunities in line with international standards, targeting India’s vision of ‘Viksit Bharat’ by 2047. A total of ₹2 lakh crore has been allocated to benefit 4.1 crore youth over the next five years, with ₹1.48 lakh crore specifically dedicated to enhancing education, skilling, and training.
Source: Author’s
Using the historical data of the Unemployment Rate in India from CMIE, we plot the above graph for the period of 2008 to June 2024. We notice that there has been a significant increase in the unemployment rates in recent years. India’s median age is 28.4 years. For the quantification of the labor market, we multiply the number of laborers employed with the number of hours worked.
Doing this calculation, the statistics for India look good, however, we overlook the productivity factor in this which is not in alignment with the global standards. A major chunk of youth in India today is either unemployed or underpaid. This contentious issue was one of the weakest links in the BJP’s win in the Indian general election of 2024. And the central government, without delay, decided to do something decisive and constructive about this to fix it.
Focus on Youth Employment in the Union Budget 2024
The main purpose of these policies and schemes is to provide opportunities for skilling and education matching international standards, which aligns with India’s goal of ‘Viksit Bharat’ by or before the year 2047. Another reason for this is to address the issue of the shortage of workers in MSMEs. Collaboration between state governments and sectors can be the catalyst for the aim of abating unemployment.
Functioning
The government has launched three new schemes related to employment-linked incentives in the union budget 2024.
Scheme A is for first-timers, the people who are seeking employment for the very first time. This is to push companies to hire fresh talent and is open to all formal sectors. The scheme involves paying a one-month wage subsidy of ₹ 15,000 in three instalments, the eligibility of which necessitates a salary of up to ₹1,00,000 per month. This is to facilitate and smoothen the transition process and enhance workers’ productivity by covering the cost of the first salary for both employees and employers.
In case the employment ends before 12 months then the employer has to refund the subsidy amount. The scheme also requires the worker to complete a compulsory online financial literacy course before the second instalment is credited to his/her account. The argument, however, is that most of the unemployed individuals are in informal sectors or are gig workers, raising doubts about whether this approach will truly resolve the issue efficiently.
Scheme B is to increase the jobs in the manufacturing sector by which approximately 30 lakh youth are said to be benefitted. This particular scheme would only be effective if the manufacturing industry can absorb all this new workforce efficiently.
Scheme C is to increase support to employers which is projected to generate 50 lakh new employment opportunities. It involves reimbursing ₹3,000 per month for the next two years to the employers with each additional worker employed. It is a financial incentive under the Employees’ Provident Fund Organisation (EPFO) where the contribution will be made towards the Employees’ Provident Fund (EPF). Moreover, employers can recover stipends under the CSR (Corporate Social Responsibility) funds.
However, the real challenge lies in whether the manufacturing industry can absorb this influx of workers efficiently.
Additionally, loans and scholarships for higher education and skilling have been introduced, alongside initiatives like the revamping of Industrial Training Institutes (ITIs) and the launch of a national research fund. Some issues identified include the lack of coordination in implementing the internship scheme, limited opportunities for MSMEs (Micro, Small and Medium Enterprises) as most of the internship vacancies are targeted in the top 500 companies, and regional disparities in skilling programs.
Skills and Research
In terms of skill building, the government has promised to provide loans up to ₹10 lakhs for higher education. This is mainly focused on students who have not earlier benefited from any government schemes. The budget allocated ₹60,000 crores for boosting centrally sponsored schemes over the next five years which will benefit 20 lakh youths in India.
Then for the development of the tier 2 and tier 3 cities, the government plans to enhance 1000 Industrial Training Institutes (ITIs) in a hub and spoke manner with change in the curriculum as well. This step is to make the curriculum more aligned with the industry’s needs and encourage the development of modern infrastructure. The plan also includes revamping the Model Skill Loan Scheme with provisions of loans up to ₹ 7.5 lakhs.
The most talked about part of the union budget is the 12-month-long internship opportunities in 500 top companies benefitting 1 crore youth in the next 5 years. The allowance is set at ₹5,000 per month with a one-time assistance fee of ₹6,000. The employers can use the CSR funds to cover up to 10% of the costs of the internship. The basic aim of this scheme is to enhance the productivity and professional skills of the individuals.
The issue that may arise here can be the inefficient coordination and implementation challenges in various companies. This plan could have included MSMEs rather than just the top 500 companies because that is where there is a shortage of workers. Additionally, the companies need to ensure that the youth gets quality training opportunities to make this plan successful.
The budget allocates ₹ 1 lakh crore to effectuate Anusandhan National Research Fund for private sector-driven research and innovation. Moreover, to increase women’s participation, they plan to establish women’s hostels, creches, and women-specific skilling programmes. To increase market access they want to enhance the women’s SHGs. But, they need to consider regional disparity in opportunities and support systems.
Other Schemes
The union budget also plans to revamp the digital infrastructure of the country, using the existing plans like BharatNet and Digital India. This is to integrate technology and education. However, there can be issues in network connectivity in rural areas. There is no exact implementation path for spreading quality digital literacy. For the mental health aspect, the government wants to make it more accessible through existing programmes like Ayushman Bharat and the National Mental Health Programme (NHHP). The argument that can arise here is having mechanisms to make it more affordable and doing away with the taboo surrounding mental health issues in India, especially in rural areas.
The National Recruitment Agency has been assigned ₹3,000 crores to facilitate a smooth recruitment process. There have been three centres of excellence for AI development established along with supporting e-commerce export hubs through public-private partnerships so that domestic artisans can get access to global markets.
Emerging Issues
- A mismatch between the skills provided and industry demands.
- Limited participation of informal sector and gig economy workers in the schemes.
- Insufficient coordination in the internship program, particularly in MSMEs.
- Regional disparities in skilling opportunities and infrastructure.
- Low utilization rates of allocated funds in some states.
Way Forward
India has transitioned from ‘Vishwa Guru’ (global teacher) to ‘Vishwa Bandhu’ (global partner) which shows that India is ready to collaborate when it comes to labour market demands. This can lead to a rise in the remittances sent from abroad. Gita Gopinath, the Deputy Managing Director at the International Monetary Fund, on her recent visit to the Delhi School of Economics, said “Between now and 2030, India will have to create between 60-148 million additional jobs”.
While it’s a long way for India, the current government has started pushing in that direction. With proper implementation, monitoring, collaboration, cooperation, and learning from countries that have harnessed the powers of human resources successfully, India and the Indian youth will surely be on the path to success in the upcoming years.
References:
- Education Times. (2024). Union Budget 2024-25: Strategic investments in youth skilling to drive sustainable growth. Education Times. https://www.educationtimes.com/article/campus-beat-college-life/99736137/union-budget-2024-25-strategic-investments-in-youth-skilling-to-drive-sustainable-growth
- Government Economic Times. (2024). Government’s futuristic skilling package: Empowering India’s youth through industry collaboration. Economic Times. https://government.economictimes.indiatimes.com/blog/governments-futuristic-skilling-package-empowering-indias-youth-through-industry-collaboration/113063934
- Observer Research Foundation. (2024). Budget 2024: Unleashing India’s youth capital. ORF. https://www.orfonline.org/expert-speak/budget-2024-unleashing-india-s-youth-capital
- Economic Times. (2024). Budget focus on job creation for youth seen spurring economic growth too. Economic Times. https://economictimes.indiatimes.com/jobs/fresher/budget-focus-on-job-creation-for-youth-seen-spurring-economic-growth-too/articleshow/112045542.cms?from=mdr
- Invest India. (2024). India’s Union Budget 2024-25: Key highlights. Invest India. https://www.investindia.gov.in/team-india-blogs/indias-union-budget-2024-25-key-highlights
- Forbes India. (2024). Unemployment rate in India. Forbes India. https://www.forbesindia.com/article/explainers/unemployment-rate-in-india/87441/1
- Centre for Monitoring Indian Economy (CMIE). (n.d.). CMIE. https://www.cmie.com
- India Today. (2024). 38% of IITians across 23 campuses remain unplaced in 2024: Report. India Today. https://www.indiatoday.in/education-today/news/story/38-of-iitians-across-23-campuses-remain-unplaced-in-2024-report-2542897-2024-05-23
About the Contributor: Ishita Deb is a research intern at IMPRI. She’s currently pursuing her MA in economics from Boston University, USA. She completed her BA in economics from Lady Shri Ram College for Women, Delhi University. Her areas of research interest include macroeconomics and international economics.
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