Employment Linked Incentive (ELI) Scheme: A Critical Analysis
UPSC Relevance
Prelims: Indian Economy (Employment, Labour, Government Schemes, Formal-Informal Sector).
Mains: GS Paper 3 (Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Inclusive growth and issues arising from it).
Key Highlights from the News
New Scheme: To increase employment opportunities, the central government approved a new scheme called the Employment Linked Incentive (ELI) Scheme.
Scheme Approach: This is an employer-centric approach. The government provides financial incentives to companies that create new employment opportunities, especially in the manufacturing sector.
Article's Main Criticism: The article argues that this scheme, instead of solving unemployment in India, is likely to exacerbate structural inequalities in the labor market.
Main Drawbacks of the Scheme:
Skill Mismatch: The main employment crisis in India is not just a lack of jobs, but also a lack of skills required by the industry among workers. The scheme does not address this problem.
Excludes Informal Sector: By prioritizing formal sector establishments registered with EPFO, the scheme completely ignores the informal sector, where 90% of India's workers are employed.
Excessive Preference for Manufacturing Sector: Excessive importance is given to the manufacturing sector, where employment opportunities are decreasing due to automation. It ignores the service and agricultural sectors, which provide more employment.
Disguised Unemployment: This scheme may lead companies to hire people merely to show numbers.
Alternative Suggestion: The article argues that instead of providing incentives to employers, the government should focus on developing workers' skills (skilling, education reforms) and improving the quality of employment in the informal sector.
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