Budget 2024: Employment-linked incentives poised to transform job creation, say brokerages

India has a unique advantage with its demographic dividend, unmatched by any other country in the world. To fully leverage this potential, creating jobs for young Indians is essential. The Indian government has made job creation a central focus in the Union Budget 2024-2025, announcing new schemes and allocating more funds for skill development.

Job creation not only helps absorb the growing workforce but also drives higher productivity, increases disposable income, and enhances the purchasing power capacity of individuals, thereby fueling overall economic prosperity.

Massive thrust on job creation

In her seventh budget address, Finance Minister Nirmala Sitharaman introduced three new employee-linked incentive schemes as part of the Union Budget for 2024-25. 

These initiatives, included in the Prime Minister’s package, aim to enhance enrollment with the Employee Provident Fund Organization and emphasise support for first-time employees, as well as offer assistance to both employers and employees.

Domestic brokerage firm Ventura Securities said, "Like the PLI was a game changer for manufacturing, we believe the Employment Linked Incentive package will help spur job creation in the country."

HDFC Securities said, "The employment linked incentive scheme has the potential to create lakhs of jobs if implemented well and make India’s growth more inclusive. A number of farming and rural-led initiatives could continue to boost rural incomes and economy and have a trickle-down effect across the larger economy with some lag."

The government aims to create approximately 4.1 crore jobs over the next five years. To support this ambitious goal, ₹2 lakh crore has been allocated. A significant portion of the budget, ₹1.48 crore, is designated for skilling initiatives, with the objective of training 20 lakh youth over the next five years.

Additionally, Sitharaman announced the modernisation of 1,000 industrial training institutes to better prepare the workforce with the skills needed to meet industry demands.

The budget also announced several key initiatives aimed at boosting economic growth and inclusivity. It increased the Mudra loan limits to ₹20 lakh from ₹10 lakh, providing greater financial support for small businesses.

Additionally, the corporate tax on foreign firms was reduced from 40% to 35%, a move designed to attract more foreign investors to set up operations in India. The abolition of the “angel tax” further underscores the government's commitment to fostering a more investor-friendly environment.

To enhance the participation of women in the workforce, the budget includes provisions for setting up working women's hostels in collaboration with industry and establishing crèches. In support of women-led development, the budget allocates more than ₹3 lakh crore for schemes benefiting women and girls, promoting greater economic and social empowerment.

"After several budgets focused primarily on infrastructure capex, the Union Budget for FY25 broadened its scope. It aims to boost employment in the manufacturing and services sectors, enhance rural consumption, improve MSME financial penetration, and promote the new direct tax regime," said SBI Capital Markets.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.