ELI Scheme: A Fiscal Push or a Structural Fix
for India’s Employment Puzzle?
✍️ By Suryavanshi IAS | UPSC Mains Ready | GS III & Essay Focus
Context: Jobs in an Age of Aspirations
India’s demographic dividend is not just a
statistic — it’s a ticking clock. With 65%
of the population under 35, employment creation is no longer an
economic choice but a national imperative.
Against this backdrop, the Union Cabinet on July 1, 2025, approved
the Employment-Linked Incentive (ELI)
Scheme — a ₹99,446 crore initiative targeted at boosting employment in the formal sector,
especially manufacturing.
But can financial incentives bridge India's chronic employment gap? Or will it become yet another well-funded but poorly monitored scheme?
What is the ELI Scheme? – Core Features at a
Glance
|
Parameter |
ELI Scheme
Details |
|
Budget |
₹99,446 crore (within ₹2 lakh crore youth package) |
|
Implementation Period |
Aug 1, 2025 – July 31, 2027 |
|
Job Creation Target |
3.5 crore jobs (1.92 crore first-time) |
|
Employee Incentive |
₹15,000 one-time for new workforce entrants |
|
Employer Incentive |
₹3,000/month per new employee for 2 years (extended to 4
years for manufacturing) |
|
Eligibility |
Workers earning up to ₹1 lakh/month |
|
Conditions |
6 months’ continuous service + financial literacy training |
The Why: Need for the ELI Scheme
1.
Jobless Growth
Reality:
Despite 7%+ GDP growth, employment
elasticity is low. Formal jobs aren’t keeping pace with economic
expansion.
2.
Skilling–Employment
Disconnect:
Schemes like Skill India trained
lakhs, but absorption in jobs has
remained poor.
3.
Labour Force
Participation Concerns:
India’s LFPR hovers around 40%,
with female LFPR below 25%,
among the lowest globally.
4.
Manufacturing
Decline:
As a % of GDP, manufacturing has stagnated. Without labour-intensive growth, Make in India remains
incomplete.
The Promise: Potential Gains from the ELI Scheme
1. Formalisation
of Workforce
·
Incentivising payroll additions may push MSMEs to register workers.
·
A step toward EPFO/ESIC expansion and improved social security net.
2. Manufacturing
Revival
·
By incentivising longer commitments in manufacturing, the scheme
complements PLI (Production-Linked
Incentives).
·
Could spur job creation in textiles, electronics, and auto ancillaries.
3. Youth-Centric
Growth
·
1.92 crore first-time workers targeted.
· Pushes India towards youth-employment-centered welfare, not just skill accumulation.
The Pitfalls: Critical Challenges Ahead
1. Moral
Hazard & Misuse
·
Ghost
employees or short-term hiring
to claim subsidies cannot be ruled out.
·
Without robust real-time verification, risks of leakages increase.
2. Exclusion
of Unorganised Sector
·
India’s informal
sector still employs ~80% of the workforce.
·
ELI may widen
the inequality between formal and informal employees.
3. Limited
Long-Term Impact
·
What happens when the two-year incentive ends?
·
Without deep structural reforms, ELI risks being
fiscally unsustainable.
4. Manufacturing
Bias
· Focus is skewed. What about employment-heavy sectors like agriculture, construction, and services?
Global Comparison: How Does ELI Stack
Up?
|
Country |
Similar
Initiative |
Learning for
India |
|
UK |
Kickstart Scheme (COVID-19 era) |
Limited impact without job guarantees |
|
Germany |
Vocational Subsidy Model |
Strong link between skilling + hiring |
|
China |
Manufacturing hiring rebates |
Deep local government role + accountability |
India’s model needs to learn from the European precision and Chinese execution.
UPSC Relevance: Paper-Wise Mapping
|
Paper |
Relevance |
|
GS III – Economy |
Employment, fiscal policy, formalisation |
|
GS II – Governance |
Centre–State implementation, inter-ministerial roles |
|
GS IV – Ethics |
Transparency, public accountability, welfare integrity |
|
Essay |
“Incentivising employment: Band-aid or breakthrough?” |
Suryavanshi IAS Solution Framework:
5-Point Plan
1.
Build Monitoring Infra
o Link
ELI to Aadhaar-verified payroll,
real-time GST-EPFO integration.
2.
Combine with Skilling
o Tie
incentives to completion of vocational or
digital courses.
3.
Enforce Gender & Regional Balance
o Reserve
portion of incentives for women, youth
from backward districts.
4.
Independent Audits & Transparency
o Annual
CAG-style reports on scheme
performance.
5.
Sunset Clause & Exit Strategy
o Design a transition plan after 2–4 years, so the scheme doesn’t become a crutch.
Model UPSC Mains Question (GS III)
“Discuss the Employment-Linked Incentive (ELI) Scheme as a tool for promoting formal employment in India. Evaluate its design, implementation challenges, and long-term implications.”
Conclusion: Not Just Job Numbers — Quality,
Dignity, and Stability Matter
The ELI scheme is a welcome innovation in India’s job policy toolkit.
However, real employment reform must go beyond temporary incentives. It
requires:
·
Labour code implementation
·
MSME upskilling
·
Gender-sensitive job creation
·
A strong social security ecosystem
"India
doesn't just need jobs. It needs just jobs — secure, formal, and future-ready."
— Suryavanshi IAS
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