Following the release of the latest Economic Survey of India and the first Union Budget of the new government, this Policy Roundup applies a ‘jobs’ lens to these documents – presenting key takeaways and highlighting I4I content pertaining to youth employment, skilling, women’s work participation, care economy, and the MSME sector. 

On 23 July 2024, Finance Minister Nirmala Sitharaman presented the Union Budget for FY2024-25. This followed the presentation of the Economic Survey of India, 2023-24, by Chief Economic Advisor V. Anantha Nageswaran. Broadly, the theme of the budget was given as “employment, skilling, MSMEs, and the middle class”, with the poor, youth, women and farmers highlighted as the core target groups. Indeed, the problem of the inadequate availability of good jobs for India’s youth, and the need to fully capitalise on the demographic dividend – including its female half – have been of widespread concern in policy and research. This Policy Roundup distils five themes related to these issues from the Survey and Budget, reflecting the official assessment of the current status of the economy and government’s priorities and plans going forward.   

Unemployable youth

High-quality education and skilling are the foundations of productive employment. The Survey puts forth that many of the Indian youth lack the skills required by a modern economy. While there has been improvement over the years, as things stand, about one in two graduates are deemed unemployable – that is, are not readily employable straight out of college. The ‘New Education Policy’ is emphasised as key to achieving educational outcomes and preparing the youth for participating in the knowledge economy.

The Survey notes the low proportions of youth that have received any vocational training.¹ Detailing the existing skilling programmes² of the government, the document acknowledges the need to revamp these initiatives as well as to introduce new ones. Noting the potential of apprenticeship programmes in bridging skill gaps, the Survey discusses the limitations of such an ecosystem in the country due to lack of coordination between education institutions and industry, the perception of vocational training being inferior to academic education, and so on.

In the Budget, the government’s response to these issues takes the form of the following measures: (i) Financial support for eligible youth for higher education in domestic institutions; (ii) Direct benefit transfer and contribution to the provident fund for first-time employees, to incentivise additional job creation in formal manufacturing; (iii)  A new centrally-sponsored scheme for skilling, which would be responsive to emerging needs; and (iv) An internship scheme to enable youth to gain exposure in top companies, with an internship allowance and a one-time grant almost fully coming from the government.

Public versus private responsibility in skilling

According to the Economic Survey, skilling is a challenge that the market should be able to solve, given the presence of skill-seekers who benefit economically from gaining skills, skill-providers who earn a fee for imparting skills, and employers who benefit from a skilled workforce. To the extent that regulation stands in the way of this operation, the responsibility of the central and state governments is to remove hurdles. Moreover, it states that the industry should do the “heavy lifting” in this matter, by taking initiative with academic institutions rather than leaving it only to the government – given the tremendous benefits that they would potentially obtain from such effort.

This stance of the government is also seen in some of the related Budget announcements, with the private companies being expected to bear training costs of interns and 10% of their allowance from their corporate social responsibility (CSR) funds under the new internship scheme.

Women-led development

Citing the Periodic Labour Force Survey (PLFS), the Economic Survey contends that female labour force participation (FLFP) in the country has risen from 23.3% in 2017-18 to 37% in 2022-23 – primarily driven by women in rural areas. While the measurement of this indicator is a subject of intense debate, the bottom-line is that India’s FLFP is low – with constraints on both the supply and demand sides. The Finance Minister stated that the large financial allocation for schemes benefitting women and girls is a “signal” of the government’s commitment towards promoting women-led development. The share of the ‘Gender Budget’³ in the total outlay has increased to 6.5% this year, which is the highest since the introduction of gender-responsive budgeting (GRB) in India in 2005-06.

As an acknowledgement of the differential challenges faced by women in engaging with the economy, the Budget speech included plans to set up hostels for working women (in collaboration with industry) as well as crèches. In addition, there would be efforts to organise women-specific skilling programmes⁴ promote market access for women self-help group (SHG) enterprises, and support women entrepreneurs via various government schemes. Under the Mudra Yojana, a scheme which facilitates micro credit to income generating microenterprises engaged in the non-farm sector – wherein about two-thirds of the beneficiaries in the past have been female entrepreneurs – there is a proposal to double the loan limit for those who have successfully repaid prior loans.

Care economy

Even besides the promise of crèches in Sitharaman’s speech, the broader focus on the care economy in the Economic Survey is noteworthy. Highlighting the ‘motherhood penalty’, the Survey discusses research on the costs of childbearing and childcare for women’s work. For instance, in her 2022 study, Leila Gautham analyses Indian data from 2004-2012 to show that children are associated with a 7% reduction in real daily wages of mothers – almost entirely driven by urban women who have superior human capital vis-à-vis their rural counterparts and are more likely to engage in salaried or skilled work. The Survey calls for more empirical studies in the Indian context, on the impact of affordable and reliable childcare facilities on outcomes for women and children.

The other aspect of the care economy is eldercare, and emphasis has been placed on a structured, future-ready eldercare policy framework for India. Along with childcare, cultural norms dictate that women shoulder eldercare responsibility disproportionately within the household – constituting unpaid work and adding to their time constraint on taking up paid work outside the home. As discussed in a recent I4I Conversation between Sonalde Desai and Farzana Afridi, the issue is likely to become even more significant with the country’s upcoming demographic transition from a very young to an ageing population.

Apart from levelling the playing field for women in the labour market, the care economy is presented as an avenue of sustainable, quality employment for India’s young women and men.

Supporting Micro, Small and Medium Enterprises

In his recent I4I post, Ejaz Ghani makes the argument that India’s manufacturing miracle is in small enterprises that have expanded in the tradable sector, while refuting the view that large enterprises are national champions and ought to be support like Chaebols in South Korea.

In the words of the Finance Minister, “This budget provides special attention to MSMEs and manufacturing, particularly labour-intensive manufacturing, formulating a package covering financing, regulatory changes and technology support for MSMEs to help them grow and also compete globally.” The MSME sector – a crucial employment-generator for the masses – has suffered major blows in recent years in the form of demonetisation, GST (Goods and Services Tax) implementation, and the Covid-19 pandemic. The Economic Survey recognises the challenges faced by MSMEs⁵ – pertaining to formalisation, finance, market access, technology, skilling and infrastructure – and the need for regular indicators of the dynamics of production and employment in the sector.

The Budget proposals include credit risk pooling for MSMEs to facilitate term loans, developing in-house capability of public-sector banks for MSMEs’ credit assessment based on their digital footprint, facilitating the continuation of bank credit during periods of stress so as to avoid the NPA (non-performing assets) stage – among others.⁶ Further, there are plans for establishment of e-commerce export hubs, governed by an enabling regulatory and logistic framework, to promote MSMEs’ access to international markets.

For a summary of recent research on job creation in India amidst the economy’s structural transformation, rapid urbanisation and rise of digital labour market platforms, see this post by I4I Deputy Managing Editor. 

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Notes:

1. According to the Periodic Labour Force Survey (PLFS) 2022-23, 4.4% of 15-29 year olds have received formal vocational/technical training, and another 16.6% received training through informal sources.
2. Prominent among these is the Deen Dayal Upadhyaya – Grameen Kaushalya Yojana (DDU-GKY), which was launched in 2014 by Government of India to train poor, rural youth and place them in salaried jobs. DDU-GKY has been the subject of various research studies. See, for example, Arulampalam et al. (2021) who demonstrate that providing detailed information about the programme and prospective jobs to participants, helps align their expectations with realities, and enhances job retention.
3. To learn more about gender budgeting, see Lahiri (2019).
4. In an IGC (International Growth Centre) Policy Brief, Prillaman et al. (2020) present findings from their 2016 phone survey of former trainees of DDU-GKY across seven Indian states. They find that, relative to men, women are less likely to receive job offers at the end of the training programme, and also less likely to accept job offers – particularly when these involve migration. 
5. Pankaj Chandra (2022) shares business models from Italy, China, Japan and various parts of India, where firms have become a part of a network that collectively acts as a large firm. This is a part of a six-part I4I e-Symposium on India’s good jobs challenge.
6. Also from the e-Symposium, see Chandra and Muthusamy (2022) for an analysis of how credit to MSMEs has evolved over the last two decades, including the role of public-sector banks and non-bank finance companies (NBFCs) in providing MSMEs with access to capital.