India's Budget 2024: A Focus on Jobs, Skills, and Wages

Jobs, Skills and Wages: Has the Union budget got the JSW factor, right?

Alive to the SOS call of the youth across the country for employment, and renewing focus on skill development, the Union Finance Minister Nirmala Sitharaman, in the first Union Budget of the new NDA government, has provided succour to students, first-time job-seekers, women, and encouraged participation of private sector to generate more jobs, greater security and respect for young adults in 'Atmanirbhar Bharat'. The Union Budget comes in the face of stampede-like situations in Mumbai when on July 16 over 25,000 youngsters streamed in for interviews for 2,216 airport loader vacancies. Similar media stories abound with class-four jobs attracting applications of thousands of post-graduates and technically qualified youth, forced to wait for years for jobs. While the 'one month wage for the first timers' scheme, announced is laudable, providing ₹15,000 in three instalments to every new entrant in all formal sectors, senior Congress leaders like P Chidambaram and Jairam Ramesh have accused the NDA government of 'lifting' the 2024 election promise of Congress from its Nyay Patra manifesto. The NDA government scheme is estimated to benefit 210 lakh youth. "Finance Minister Sitharaman has taken a leaf out of Congress 2024 Lok Sabha polls manifesto by announcing an internship programme but in their trademark style, the scheme has been designed to grab headlines with arbitrary targets rather than a programmatic guarantee," said Congress leader Jairam Ramesh. "I am glad to know that the Hon'ble FM has read the Congress Manifesto LS 2024 after the election results. I am happy she has virtually adopted the Employment-linked incentive (ELI) outlined on page 30 of the Congress Manifesto," P Chidambaram posted on social media platform X (formerly twitter). "I am also happy that she has introduced the apprenticeship scheme along with an allowance to every apprentice spelt out on page 11 of the Congress Manifesto. I wish the FM had copied some other ideas in the Congress Manifesto," he added, sardonically. In her seventh Budget speech, Minister Sitharaman's 'Skilling Programme' has caught the nation's attention. While it promises to skill 20 lakh youth over a 5-year period, it will also upgrade 1,000 Industrial Training Institutes (ITI)'s in the hub and spoke arrangements with outcome orientation. In her speech, the Minister emphasized that course content and design will be aligned as per skill needs of industry. "We recognize the 2024 Union Budget's emphasis on job creation and skill development. With a growing population that is set to become one of the youngest workforces in the coming years, the emphasis on initiatives to incentivize first-time entrants to the job market is essential. Government plans to enhance skills, improve infrastructure, and support entrepreneurs are crucial steps to boost job opportunities and the economy," said Sashi Kumar, Head of Sales, Indeed India. Sharing data on the job market, Sashi Kumar revealed, "the demand for Artificial Intelligence & Machine Learning engineers (AI/ML) has surged by 433%; BPO executives follow closely with a 314% increase. On the sectoral front, sanitation and construction industries are experiencing the highest growth, with job postings increasing by 160% and 121%, respectively, as seen over June 2022 - June 2024. Significant job growth is witnessed in education, and medical research." Jobs in the manufacturing industry in India are growing at an impressive 40%, with a focus on specialised roles, like CNC operators and production supervisors. There is a shift in the skills landscape too, Kumar said, English proficiency and communication are as important as technical proficiency. From the Ahmedabad-based Entrepreneurship Development Institute of India, Dr Reshmi Manna hailed the skill development plans, the ₹2 lakh crore initiative to boost job creation and skill development for 4.1 crore youngsters over the next five years. "This multi-pronged strategy is a major effort to combat unemployment and cultivate a competent workforce in India. It seeks to fill the skill gaps and increase employability. Budget aims to make young people more employable, more successful in the business world. It includes initiatives encouraging innovation and supporting companies, demonstrating that entrepreneurship is an absolute career path," said the young Associate Professor, adding that India's commitment to Sustainable Development Goals (SDGs) would also be met. Resonating with the SDGs are the new schemes to facilitate higher participation of women in the workforce through setting up of working women hostels in collaboration with industry and establishing creches. Higher education is also in the ambit, as the minister announced financial support for loans up to ₹10 lakh for higher education in domestic institutions. There would be direct e-vouchers to 1 lakh students every year. Youth orientation, and efforts to drastically reduce the distress factor among jobseekers moves young Noida-based trainer, Nataasha Bhardwaj, co-found Peerspro Consulting. She said, "not just emphasis on skill development for the youth, as spelt out in the budget, there is need to include emotional and spiritual health, sales training, negotiating skills, time management, communication skills, and personal financial management." Drawing upon training experiences in Tier-II and Tier-III towns, Nataasha observed, "there may not be a scarcity of jobs in these fast-growing markets but rather a shortage of skilled candidates for these positions." Her action plan: Book clubs are imperative; for English and regional language speakers; training in public speaking and personality development to be included in these programmes. The Union budget makes a direct call on the employers, with the promise the government will reimburse EPFO contributions of employers up to ₹3000 per month for 2 years for all new hires. This is expected to generate 50 lakh jobs. In the manufacturing sector, once again linked to first time employees, budgetary incentives have been announced for both employees and employers for EPFO contributions in the specified scales for the first 4 years. Thirty lakh youth are expected to benefit from these major schemes. Adding the dimension of revolutionising productivity and worker efficiency, Prof Sunil Saxena, Director of New Delhi-based Easy Media Academy, said "training in Artificial Intelligence (AI) also needs to be integrated for the youth, young professionals and government officials irrespective of their experience." The top 5 skills most in demand are Machine learning, Python, AI core skills, communication skills, and Natural language processing. Said Sashi Kumar, "at Indeed India, our data shows 42% of generative AI jobs in India mention "Machine learning", while 40% ask for "Python" skills. AI core skills and communication skills are also sought after, appearing in 36% and 23% of job ads respectively. Other skills that are in demand are Natural language processing (20%), TensorFlow (19%), Data Science (17%). Prof Saxena, a senior training professional, hailed the Minister's stress on employment and skill development as the twin engines to drive Aspirational India. "We must accept that AI will change the way most jobs are done today. Let's also accept that AI will not take away jobs of those who want to learn; it will sweep away those who don't want to get onto the AI bandwagon. The government is on the right path. This is the smartest way to make India a strong and vibrant nation of tomorrow," he said in a spirit of optimism which would surely gladden the Union Finance Minister.

Budget proposals seen as medium-term play to increase employability and address skill gap

Budget proposals aimed at employment and skilling are expected to yield significant results in the medium to long term. Economists suggest immediate large-scale impact is unlikely, with notable benefits in manufacturing and capability building. Policies are designed to create a skilled workforce, boosting sectors like textiles and chemicals quicker than others. Formal job creation remains a critical focus area.The budget proposals to facilitate employment and skilling have boosted sentiment but are likely to translate into sizeable numbers only in the medium to long term, rather than triggering any major turnaround in the job market in the near future, said economists and hiring experts. Some sectors like manufacturing will be clear beneficiaries, but the budget is designed as more of a medium-term play, they said, adding that its focus is on capability-building and making people employable, which will lead to more jobs in the future. "On the one hand, there is unemployment. On the other hand, there are employers struggling with labour shortages because they can't get people with the right skills," said Sachchidanand Shukla, group chief economist, Larsen & Toubro. "These policies are to create a pool of skilled people and also nudge employment - more a five-year agenda to enhance employability and address skill and labour shortages." Shukla said the proposals were a "very broad positive step" that's good for the economy and would indirectly address the consumption demand. "But expectations that there will be an immediate payoff is not right," he said. "The government has to take the lead; businesses will follow," Shukla said. "The budget is also trying to create a future pool for manufacturing. That will buy some insurance against disturbances in the future when AI may impact services and white-collar jobs." K Sudarshan, managing director, EMA Partners India, said the budget sought to solve the fundamental issue in terms of capability building and making graduates employable. Low-end sectors such as textiles, leather, basic chemicals, basic machine tools and garments might see a quicker response but overall recovery would take some time, said Abheek Barua, chief economist, HDFC Bank. "Labour market rigidities persist, technologies can be inflexible, skill building is not like flipping a switch," he said. The budget focused on formal jobs creation and that's an area of immediate need, with only 20% formal work in India, said Ajit Isaac, chairman of business services provider Quess Corp. In certain sectors, like manufacturing, the movement will be faster, while it'll take longer structurally to add formal jobs in sectors such as hospitality and retail, he said. "The schemes on EPFO (Employees' Provident Fund Organisation) support, employment-led skilling programmes, contribution to first-time formal employees will assist job creation across all segments, i.e., banking, ITeS, retail, telecom and manufacturing," Isaac said. CIEL HR Services chief executive Aditya Narayan Mishra said the budget will have a positive impact on the job market in the short term. The consistent capex push will drive growth in demand in the construction, engineering and manufacturing sectors, while the sops given for fresher hiring and policy-level support for skilling will give a temporary boost to the job market across sectors, he said. In the short term, sectors such as financial services, infrastructure, and retail and e-commerce, along with initiatives like urban development, might see quicker job creation due to immediate government initiatives and investments, according to Kartik Narayan, CEO - staffing, TeamLease Services. "Sectors such as power and energy, tourism, agriculture, and initiatives like Inclusive HRD and Next Gen reforms may take longer to see the full impact of job creation due to the nature of the projects involved, such as large-scale development projects and technological advancements," said Narayan. "Initiatives like the National Green Hydrogen Mission and the comprehensive development of tourism sites will require time to develop and realise their full employment potential."

Keep kaam & carry on: FM Sitharaman has recognised the realities of India's job market, and done her best to set things right

The recent budget tackled the pressing need for productive, well-paying jobs in India, aiming to balance the labor-capital mix in industry. It introduced employment-linked incentives (ELIs) and a major internship program for skilling in top companies, projecting the creation of 8 million skilled workers annually. This shift towards labor-intensive production and increased consumption through revised income tax slabs is intended to boost consumer demand. Meanwhile, capital expenditure remained unchanged, with significant funds allocated for job creation and skill development to be distributed over upcoming years. Of the multiple challenges facing the economy, creation of productive well-paying jobs vies for a spot at the top of the list. This is inextricably linked to a skill shortage and structural problems in the labour market that discourages labour-intensive production. Main thrust of the budget is the attempt to alter the lopsided mix of labour and capital in Indian industry. Thus, we have a slew of employment-linked incentives (ELIs) that hopes to encourage labour-intensive production. The budget estimates that these measures will help create 8 mn skilled workers a year. To put this in perspective, the Economic Survey estimates the annual addition to the workforce at roughly the same number on the basis of current demographic trends. There is a parallel effort to improve skilling. Of the many initiatives announced, highlight is the internship programme in India's top 500 companies. This 'shopfloor' training could help align specific needs of companies to skill supply. Similar models have worked well in other economies like Germany. Economists often tend to look at fiscal policy in terms of what components of overall expenditure it expects to drive. One could argue that while GoI's investment spending has done the heavy lifting in the past, there is a pivot this time towards consumption. Change in I-T slabs, along with the direct benefit transfer to first-time workers, is likely to spur consumption, particularly for small-ticket items, by increasing disposable incomes in the near term. The addition to disposable income for individuals is relatively small, aimed at lower middle class 'neo-consumers'. The immediate beneficiary would be small-ticket FMCG products. But were the mass job creation strategy to succeed, this could broaden the consumer base for a range of products and reignite consumer demand. Capex has, however, not been compromised. Allocation towards asset creation remains unchanged at the interim budget's estimate of ₹11.1 lakh cr. Quite predictably, the budget has had to make overtures towards the states run by BJP's coalition partners. Both Bihar and Andhra Pradesh have had their fair share of allocation either directly or through soft loans from multilateral agencies that the Centre will help service. For those wondering how all this adds up to a sharply reduced fiscal deficit target of 4.9% for 2024-25 vs 5.6% in 2023-24, the answer partly lies in the additional ₹1.5 lakh cr (0.5% of GDP) that RBI and some PSUs paid out that has been used to close the fiscal gap. Besides, the money given to the 'coalition states' are not bunched up this year and will be transferred through interest-free loans and special grants over a few years. Ditto for the allocation of ₹2 lakh cr for employment incentives and skill formation that will be staggered over the coming years. Some questions remain. Did FM over-compress the fiscal deficit? Could the dividend bonanza have been used for slightly higher allocation for, say, rural development, keeping the fiscal deficit at the 5.1% target of the interim budget? Mixed success of the PLI scheme should be a reminder that fiscal incentives only go so far in producing the desired outcome. Labour laws (largely the domain of states) remain unfriendly, and even with fiscal support, firms might be wary of taking on more workers. Will the new skilling initiatives compensate for gaps in our education system, starting with primary education, which have held formal non-farm job creation back? How much freedom does technology offer in changing the input mix in production processes in an age where AI and automation are on the rise? Besides, will companies hire workers at the desired pace when the business environment, particularly for manufacturing, looks murky? The Economic Survey has pointed to the overcapacity in manufacturing in China that threatens to make life difficult for manufacturers elsewhere. Hard decisions need to be taken on how much Indian industry needs to plug into China's supply chain to ramp up growth. How does this align with our security concerns? Add to this the threat from the US that wants to revive domestic manufacturing through fiscal measures (subsidies for key sectors like semiconductors and green tech) and tariffs. To be fair, the finance ministry can't tackle all these problems on its own. Its job is to allocate funds and leave outcomes of its allocations to other stakeholders - other ministries, industry and households. A somewhat fractious debate played out in the media on whether a certain level of growth was adequate to absorb India's supply of able-bodied workers. The FM must be given full credit for not getting blindsided by some of the conflicting claims made in this spat. She has recognised the realities of India's job market, and done her best to set things right.

'Skilling is our youths' passport to the future of work'

Today, India stands at a pivotal juncture -- our nation forms the world's fifth largest economy with tremendous scope for unparalleled growth, but also with a pressing need for enhanced employability. With a vision of Viksit Bharat for India@2047 to strive towards, we must reckon with how to skill today's youth to bridge the unemployment-employability gap while shaping nation-building and progress. The Union budget 2024-25 echoed the interim budget's focus on 'yuva' as one of four major groups to support. Highlighting a welcome package of five schemes facilitating employment and skilling for 41 million youth over a 5-year period, with ₹1.48 trillion allocated for education, employment, and skilling, today's announcements bode well for the future of our youth, given the government's emphasis on skill development. The barriers faced by the workforce are immense: Nearly 73% of workers aged 15-59 years did not receive any formal or informal vocational or technical training, according to the Periodic Labour Force Survey 2022-23. With India's demographic dividend expected to peak around 2041 and the working-age population forecast to shrink, we must seize the current window of opportunity to harness the potential of India's labour force and fuel economic growth. In parallel, we must leave no young person behind, and ensure that the fruits of skilling initiatives are also reaped by women, whose labour force participation has been historically low. By introducing initiatives to this end, the Budget indicates a positive way forward. Empowering women is not just a social good but also an economic imperative. In fact, a Barclays report indicates that ensuring that women account for half the new workforce created by 2030 is critical for India to attain an 8% GDP growth rate. Skilling begets progress -- to bridge India's skills gap and develop a more mature ecosystem that prioritizes not just opportunities today but also a secure means of livelihood tomorrow, the path ahead is marked by several critical steps. One is to bolster institutional support, reaffirmed by the budget's emphasis on upgrading industrial training institutes. With the mission of advancing a future-ready workforce, training institutions can equip youth with skills to succeed in the 21st century. Through the Indian Institute of Skills, established in collaboration with the government of India's ministry of skill development and entrepreneurship and Tata Trusts, we strive to make this goal a reality. By offering highly specialized trainings based on industry demand, across artificial intelligence, data analytics, digital manufacturing, and more, for instance, we hope to gear students up for success. The product of a unique collaborative endeavour, we expect that this institute, albeit at a nascent stage currently, can serve as a model spurring the rise of similar institutions that develop carefully curated courses to meet evolving work requirements and support gainful employment, particularly for those with unrealized potential who dropped out of the education system. It puts them back in the driver's seat -- endowing them with the tools and training needed to retain meaningful, fulfilling jobs. To strengthen the skilling ecosystem, the active involvement of public and private players, and a strong industry-academia connect, is also vital. This, in turn, can enhance skilling infrastructure, augment the number of trainers available, and scale the reach of meaningful programmes and government schemes to far-flung parts of the country. Reinvigorating pioneering schemes, such as Skill India, National Policy for Skill Development and Entrepreneurship 2015 -- an update to which is anticipated -- Pradhan Mantri Kaushal Vikas Yojana, among others, can also strengthen the investment in vocational education, training, and entrepreneurial support. Further, conducting a thorough nationwide research and analysis of the factors behind unemployment and specific gaps in education and skilling might offer a constructive framework for the road ahead. Transformative financing solutions including impact bonds, such as the Skill India Impact Bond, can also serve as a catalyst heralding progress. As a first-of-its-kind approach, this tool was designed to offer training and employment opportunities. It can drive a paradigm shift -- from primarily government or CSR donor-funded programmes to a model drawing in greater impact investment, including from the private sector. With aspirations for long-term skilling outcomes, it helps overcome a demand-supply mismatch, ensuring that people are trained with the right skills for the right job. These also offer promising solutions for young women -- who record high rates of enrollment. As Malcolm X once said, "Education is the passport to the future, for tomorrow belongs to those who prepare for it today." India's journey towards realizing its potential as a skilled nation may be riddled with obstacles, but the progress being made is promising. This is marked by ambitious schemes, innovative approaches, and collaborative efforts to sow the seeds of change and move India's youth many steps closer to livelihood opportunities, laying a foundation for India's development.