K.N.Umesh
Employment Linked Incentive Scheme, with an outlay of Rs.2 lakh crores for 5 years, was announced in the Union Budget 2024-25 earlier this year. It consists of Rs.1.07 lakh crore Plan A, B & C funding to enable 3.1 crore employment generation, Rs.63,000 crore Internship Programme for skilling 1 crore youth in 5 years, and Rs.30,000 crore for upgradation of Industrial Training Institutes (ITI’s).
The Internship Programme – Pradhan Mantri Internship Yojana – envisages skilling 1 crore youth aged 21 to 24 years over 5 years in top 500 companies. The Government shall pay stipend of Rs.5000 per month and one-time assistance of Rs.6000 to the interns and the companies may spend their Corporate Social Responsibility (CSR) fund for other expenses of training. Skilling 1 crore youth over 5 years means skilling 20 lakh youth per year, that is, on an average skilling 4000 youth per year as interns in each of the 500 companies. A pilot project to skill 1.25 lakh youth with Rs.800 crore allocation is to start from December 2, 2025.
Plan A envisages paying Rs.15000 to each new recruit enlisted as a new subscriber on Employees Provident Fund Organisation (EPFO). Plan B envisages paying the employees’ and employers’ share of EPFO in manufacturing sector, calculated at 24% of the salary for first two years and 16% and 8% for 3rd and 4th years respectivel, if the employer employs at least 50 new workers or 25% of previous years number enlisted on EPFO through the company. Plan C envisage paying employer contributions to EPFO of up to Rs.3000 per month for 3 years for all sectors, if a company with less than 50 employees recruits at least 2 new employees and, a company with 50 or more employees recruits at least 5 new employees. Beneficiary under Plan B or Plan C can be a beneficiary under Plan A also.
Prior to this, in the Union Budget 2019-20 Production Linked Incentive Scheme (PLI) with an outlay of Rs.1.97 lakh crore for 5 years for 14 manufacturing sectors was announced, later expanded to 16 sectors. Incentive varies from 3% to 20% on the net additional incremental sales done by the company over the base year. It was launched in the name of generating jobs, increasing exports substituting imports and increasing the contribution of manufacturing sector to the GDP to 25%.
Similarly Design Linked Incentive Scheme (DLI) and Capital Investment Expenditure Incentive (Capex Incentive) for the semiconductor industries was framed. The Capex Incentive 1.0 was earmarked an outlay of Rs.76 thousand crore. The Incentive for Assembly & Testing plants was 30% of the capital Investment expenditure for conventional packaging and 40% for advanced packaging in 2021, later raised to 50% in 2022. The plants at Sanand in Gujarat were allocated Rs.49 thousand crores of it.
In spite of PLI & Capex Incentive, the Economic Survey 2023-24 figures reveal that there is no substantial improvement in jobs creation and India needs to generate 78.5 million jobs annually to cater to the unemployed youth. As per Periodic Labour Force Surveys, the share of workers in manufacturing sector which was 12.1% in 2018-19 has declined to 11.4% in 2023-24. The share of contribution from manufacturing sector to GDP which was 17% in 2010, declined to 15% in 2014 and to 13% in 2023. As per Annual Survey of Industries (Factory Sector) 2022-23 the share of wages in net value addition is 15.97% while the share of profit is 51.92%.
A CMIE survey reveals that out of announced private investment projects worth Rs.92.33 trillion during 2014-2023 only Rs.24.22 trillion i.e., only 26.33% were realised. The share of productive assets such as machinery in gross fixed capital formation (GFCF) has fallen to 33.9% from 35.8% during 2016-2023. Share of dwellings, other buildings & structures has risen to 55.4% from 52%. The share of Public Capital Expenditure by the Union Government is more than Private Capital Expenditure. In spite of sharp increase in Centre’s Capex, as CPSE’s investment has fallen, Capex of both Centre & CPSE’s together has declined to 3.9% of GDP in FY24 from 4.9% in FY20.
The World Investment Report 2024 reveals that share of inflow of FDI has fallen from 6.5% in 2020 to 2.1% in 2023. Decadal average growth rate in FDI inflows was 50.1% in 1990’s, reduced to 30.7% in 2000’s, and has fallen to 4.6% in 2010’s. Inflows in greenfield also declined from $49 billion in 2022 to $28 billion 2023. WTO’S Global Trade Outlook and Statistics report says India accounts for 1.8% of global exports of goods and contracted by 4.71% in 2023. Global Trade Research Initiative (GTRI) says Indian exports & imports dipped by 2.6% in 2023 compared to 2022.
Latest discussions are for Rs.1.26 lakh crores Capex Incentive Scheme 2.0 for semiconductor and chip components manufacturing. Rs. 35 to 45 thousand crore component manufacturing PLI Scheme for Electronics is sought to reduce the import bills incurred due to PLI 1.0 scheme for the electronics manufacturing sector.
140 beneficiaries of PLI Scheme attended a meeting on 29th September 2024 called by the Ministry of Industries & Commerce to mark the decade of Make in India. The Government presentation to the meeting claimed that Rs.1.46 lakh crore out of Rs.1.97 lakh crore outlay for PLI Scheme has been spent with the rest to be exhausted in 2024-25, and Rs.76 thousand crore earmarked for Capex Incentive has also been exhausted. The meeting deliberated upon Ease of Public Sourcing, regarding liberalising public procurement rules to encourage localisation of production. Through this, the corporates are urging for market through Government procurement of commodities produced through these incentive schemes. Media reports say that the participants urged for allowing the Chinese technicians to overcome the bottleneck in manufacturing sector and Chinese capital in electronics manufacturing to reduce the increasing import bill in the sector as the localisation in mobile manufacturing is hardly 20% and the rest is imported from China.
The dismal state of employment generation, contracting exports, increasing imports, low percentage of realisation / completion of the announced private projects, declining share of FDI inflow and falling contribution of manufacturing sector to GDP reveal that the schemes of PLI, DLI and Capex Incentive have not yielded the claimed expected results. Rather the schemes are subsidising the cost of investment through Capex Incentive and production cost through PLI and now employment cost through ELI.
The proposed ELI Scheme, Capex Incentive 2.0 and PLI 2.0 for electronics components manufacturing shall only help the corporates to siphon of lakhs of crores from the public exchequer. Given the decade long experience of Modi Government’s earlier schemes of incentivising economy, the ELI Scheme instead of generating jobs shall only promote the fixed term employment and provide free manpower in the form of interns for next 5 years for top 500 companies, fund the statutory liabilities of employers to EPF and labour cost. ELI shall contribute to huge unemployed reserve army of skilled and subsidise the cost to the company enabling the corporates to usurp higher surplus value.