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Written By: DINESH SOOD Thenewsdose.com
Last Updated: August 1,2025,2.10PM
India faces a workforce challenge that goes beyond the mere lack of jobs; it also revolves around the shortage of job-ready workers. According to the India Skills Report 2024, only 45.9% of graduates are considered employable. A standalone hiring incentive will achieve little if employers struggle to find skilled talent. This presents a critical opportunity: employment-linked incentives (ELI) must be directly tied to certified skill development.
As India strives to become a $5 trillion economy, generating employment is becoming a key policy priority. The government’s announcement of the Employment Linked Incentive (ELI) scheme, set to launch on August 1 with a budget of ₹99,446 crore, is a significant step in that direction. This scheme is designed to encourage job creation in the formal sector, particularly in manufacturing. It offers employers a one-time incentive equivalent to one month’s wage (up to ₹15,000) for each new hire, along with a recurring monthly benefit of ₹1,000 to ₹3,000 per additional employee for four years. The goal is to create 3.5 crore new jobs over the next two years, reflecting the scale of India’s workforce and the urgency of the action required.
However, this ambitious initiative could fall short of its true potential if it remains narrowly focused on manufacturing alone. India’s employment challenge is not confined to a single sector; it is structural, demographic, and multifaceted. While the formal manufacturing sector is essential, it cannot accommodate the vast number of semi-skilled and unskilled youth entering the workforce each year. Additionally, it cannot fully address the significant underemployment prevalent in various sectors, including rural enterprises, MSMEs, and the gig economy. If the aim is to generate sustainable and widespread employment, the ELI must be reimagined as a more inclusive, skill-linked, and sector-agnostic framework.
India faces a workforce challenge that goes beyond the mere lack of jobs; it also revolves around the shortage of job-ready workers. According to the India Skills Report 2024, only 45.9% of graduates are considered employable. A standalone hiring incentive will achieve little if employers struggle to find skilled talent. This presents a critical opportunity: employment-linked incentives (ELI) must be directly tied to certified skill development.
Employers hiring candidates trained through recognised programs—such as those from the National Skill Development Corporation (NSDC), Pradhan Mantri Kaushal Vikas Yojana (PMKVY), Industrial Training Institutes (ITIs), or even state-run and private skill centres—should be offered a special income tax rate for employment-intensive skills. This would allow the government to stimulate formal job creation in a fragmented sector. It would also help transition informal labour into formal frameworks, expand the tax base, and strengthen social security coverage. By doing so, we can not only boost hiring but also bridge the persistent skill gap that threatens India’s growth story.
Such an approach has strong international precedents. For example, Singapore’s Jobs Growth Incentive (JGI) provides up to 50% wage support for firms that hire and upskill local workers. The United States’ Work Opportunity Tax Credit (WOTC) rewards employers who hire individuals from disadvantaged groups, including the long-term unemployed, veterans, and youth lacking formal qualifications. Germany’s vocational training system combines classroom education with on-the-job training, which is heavily subsidised by the government and incentivised through tax breaks. These countries understand that job creation and skill development must go hand in hand, and that incentives should reflect this reality.
The gig and platform economy is another area that ELI currently overlooks. With projections suggesting over 23.5 million gig workers by 2030, India cannot afford to treat this segment as peripheral. Food delivery platforms, ride-hailing services, freelance digital marketplaces, and e-commerce logistics already employ hundreds of thousands of youth, many of whom work without contracts, benefits, or upskilling support. If these platforms receive ELI incentives linked to formalisation—such as registering workers for social insurance or providing skilling modules—it could transform the quality and dignity of work in this fast-growing sector.
Moreover, ELI must be rural-conscious. From food processing clusters to handloom cooperatives and micro-enterprises, supported by schemes like SFURTI and PMEGP, there is immense job-creation potential in non-urban areas. Extending ELI benefits to such units—especially those that employ skilled or semi-skilled rural youth—would not only generate employment but also stem migration to cities and support balanced regional development.
For this to occur, several structural changes are required. First, the ELI framework must integrate seamlessly with the government’s existing skilling architecture—linking incentives to training outcomes, placement records, and wage benchmarks. Second, a unified digital platform should be created to enable employers to register new hires, upload skill certification data, and claim benefits with minimal paperwork. This will reduce friction, avoid duplication, and ensure real-time tracking. Third, an annual review mechanism must be established to assess sector-wise absorption, facilitate course correction, and ensure alignment with rapidly changing employment trends, particularly in technology and services.
In conclusion, the employment-linked incentive scheme is a step in the right direction, but the road to mass employment needs a broader, bolder vision. India’s demographic dividend will not last forever. The country must move beyond the outdated binaries of manufacturing versus services, urban versus rural, and formal versus informal. It must embrace a fluid, skills-first employment ecosystem. By expanding ELI to include skill development, gig platforms, and rural enterprises—and by offering targeted tax and regulatory incentives—the government can transform ELI from a narrow hiring subsidy into a national employment mission. The time to make that leap is now.
: The writer is a Co-Founder and MD of Orane International, a Training Partner with the National Skill Development Corporation (NSDC), and a Network Member of, India International Skill Centres(IISCs), an initiative of GoI. Views expressed are personal.
