Budget 2024: Tryst to meet the aspirations of Youth in India

Youth in India face a myriad of challenges that hinder their potential and development. Unemployment is a major concern, with many young people struggling to find jobs that match their qualifications and aspirations. With unemployment as a pressing issue, with many young graduates struggling to find suitable employment despite the country's economic growth. The education system often does not equip them with the necessary skills for the job market, leading to a skills gap. Although there is a significant pool of labor available in India, but there is a notable skills gap between industry requirements and the qualifications of the workforce. Many sectors, such as technology, healthcare, and manufacturing, often struggle to find workers with the necessary expertise and practical skills. Moreover, the informal sector, which employs a large portion of the workforce, lacks structured skill development opportunities.

The education and vocational training systems in India are still evolving, with many institutions failing to provide the hands-on experience and industry-relevant training needed. There is need for comprehensive reforms in the labour market, a boost to small and medium enterprises, and significant investments in emerging sectors. Concurrently, there is a noticeable migration trend from rural areas and tier-1 cities to tier-2 and tier-3 cities, driven by the quest for improved job prospects and living standards. These smaller cities are witnessing rapid growth and urbanization, offering both opportunities and challenges. To fully capitalize on this trend, there is a critical need for better infrastructure, enhanced connectivity, and sustainable urban planning to ensure balanced regional development and to alleviate the strain on larger metropolitan areas.

Aiming to reach a youthful demographic of 21 million, the Budget 2024 injects essential capital directly into the hands of young workers. It has announced an ambitious incentive schemes and initiatives aimed at facilitating employment, skilling, and other opportunities for 4.1 crore youth over a five-year period with a central outlay of ?2 lakh crores. This comprehensive approach focuses on enhancing employment opportunities, particularly through employment-linked incentives and targeted skilling programs.

Employment linked incentives

The Budget focuses on the employment linked incentives to induce rapid job creation in India. Firstly, by providing a direct benefit transfer of one-month salary to first-time employees is a thoughtful move to encourage youth to enter the formal workforce. This scheme not only offers financial support but also incentivizes formal employment, which can lead to better job security and benefits for the youth. This initiative provides a direct benefit transfer of one-month salary in three instalments, up to ?15,000, for all first-time employees in formal sectors earning up to ?1 lakh per month. It is expected to benefit 210 lakh youth.

Secondly, by targeting the manufacturing sector, scheme-B aims to boost industrial growth and create substantial employment opportunities. The focus on EPFO contributions ensures that both employees and employers’ benefit, fostering a more sustainable employment environment. This scheme incentivizes additional employment in the manufacturing sector by providing incentives linked to the employment of first-time employees. Both employees and employers will receive incentives concerning their EPFO contributions for the first four years, benefiting 30 lakh youth and their employers.

Lastly, scheme-C emphasizes reimbursing employers for additional employment helping them to reduce the financial burden on businesses, particularly SMEs, thereby encouraging them to hire more staff. Focusing on all sectors, this scheme will reimburse employers up to ?3,000 per month for two years towards their EPFO contribution for each additional employee, expected to incentivize the employment of 50 lakh persons.

Private investments for job creation

Recognizing the potential of cruise tourism in India, the budget proposes a simpler tax regime for foreign shipping companies operating domestic cruises. This initiative aims to boost the employment-generating industry and attract more foreign cruise operators to India. Similarly, India's leadership in the diamond cutting and polishing industry is further supported by providing safe harbour rates for foreign mining companies selling raw diamonds in the country. This measure is expected to enhance the industry's global competitiveness and support skilled workers. To attract foreign capital for development needs, the budget proposes reducing the corporate tax rate on foreign companies from 40% to 35%. This reduction aims to make India a more attractive destination for foreign investment, facilitating economic growth and development.

The focus on MSMEs and labour-intensive manufacturing is a positive step. By addressing financing, regulatory changes, and technology needs, the budget aims to strengthen the MSME sector, which is vital for job creation and economic diversification. This support can help MSMEs compete globally and drive domestic economic growth. To strengthen the Indian startup ecosystem and support innovation, the budget proposes abolishing the angel tax for all classes of investors. This move is expected to attract more investment into startups, fostering entrepreneurial spirit and innovation.

Upskilling & labor reforms

The new centrally sponsored skilling scheme, in collaboration with state governments and industry, is a forward-looking step. Upgrading Industrial Training Institutes and aligning course content with industry needs will ensure that the youth are better prepared for the job market. This focus on emerging skills and technologies is crucial for keeping pace with global trends. The scheme aims at skilling 20 lakh youth over five years. Additionally, 1,000 Industrial Training Institutes will be upgraded to align course content with industry needs.

The revisions to the Model Skill Loan Scheme and the provision of education loans with interest subvention are practical measures to make education and skill development more accessible. This financial support can help bridge the gap for students who might otherwise be unable to afford higher education or vocational training. The revised Model Skill Loan Scheme will facilitate loans up to ?7.5 lakh with a government guarantee, helping 25,000 students annually. Furthermore, financial support for education loans up to ?10 lakh for higher education in domestic institutions will be provided, with e-vouchers for annual interest subvention of 3% given to 1 lakh students each year.

To enhance support for labour, the government will facilitate a wide array of services, including employment and skilling. The integration of the e-shram portal with other portals aims to create a one-stop solution for workers. This integration will provide a cohesive platform to address the rapidly changing labour market, skill requirements, and job opportunities, connecting job aspirants with potential employers and skill providers. The Shram Suvidha and Samadhan portals will be revamped to improve ease of compliance for industry and trade. This revamp is expected to streamline processes, reduce bureaucratic hurdles, and foster a more conducive environment for business operations.

Augmenting Participation of Women in the Workforce

The substantial allocation of over ?3 lakh crore in the budget for schemes benefiting women and girls is a commendable step towards promoting women-led development. This investment signifies a strong commitment from the government to enhance the economic participation and empowerment of women. In order to boost female workforce participation, the government plans to collaborate with industry to set up working women hostels and creches, organize women-specific skilling programs, and promote market access for women SHG enterprises. These initiatives can significantly improve women's participation in the workforce, contributing to greater gender equality and economic empowerment.

Key lags

• Nothing for informal labor: Beside agriculture, the focal point of the government's aim is to shift a large chunk of the workforce from the informal sector to the formal. Although India has almost 92% of workers engaged in informal sector.
• Limited Reach and Duration: While the employment-linked incentives are beneficial, their impact may be limited by their scope and duration. For instance, the schemes focus primarily on first-time employees and specific sectors, which might not address the broader and more diverse employment needs of all young people.
• Dependency on Employer Participation: The effectiveness of schemes providing incentives to employers depends on their willingness to hire additional staff. SMEs, which are often less equipped to absorb financial incentives, might not fully benefit from these schemes.
• Implementation Challenges in upgrading ITIs and aligning training with industry needs require significant coordination between government bodies, educational institutions, and industry stakeholders. Effective implementation is crucial but challenging and may face bureaucratic and logistical hurdles.
• Gaps in Practical Training: While upgrading ITIs is a step forward, the education system still needs a more comprehensive overhaul to ensure that all educational institutions provide practical and industry-relevant training across various fields.
• Private sector dependence for employability: The focus on attracting foreign capital and supporting specific industries may not fully address the structural issues within the domestic job market. Over-reliance on foreign investment could lead to an imbalance if domestic sectors and startups do not receive comparable support.
• Regional Disparities: The migration trend to smaller cities and the focus on urban infrastructure improvements may not fully address the challenges faced by rural youth. Without targeted interventions in rural areas, the benefits of urban development might not reach all segments of the population. The budget did not address these concerns.

Concluding remarks

Overall, the Budget 2024 demonstrates the government's commitment to inclusive development, with targeted efforts to support youth, women, and marginalized communities through enhanced employment, skilling, and financial support initiatives. The focus on incentivizing formal employment, supporting women's participation, upgrading skilling infrastructure, and providing financial support for education is likely to have a positive impact on the socio-economic fabric of the country.

It presents a well-rounded approach to economic development, addressing key sectors and leveraging strategic support measures to foster growth. The focus on education, MSMEs, startups, and key industries suggests a comprehensive strategy to build a more robust and dynamic economy. These measures, if effectively implemented, could lead to significant improvements in employment rates and skill levels among the youth, driving India's growth and development in the coming years.

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