Why in News :
In July 2025, the Union Cabinet approved the ELI Scheme, as part of the Union Budget 2024–25’s five-fold youth employment package.Aimed at formalizing the workforce, boosting manufacturing employment, and enhancing social security coverage.
Context and Background
- India has a high informal employment share (~90%), low social security penetration, and high youth unemployment rates.
- Past incentive schemes focused on production (PLI), but the ELI Scheme marks a shift to employment-linked outcomes, addressing a long-standing demand for job-centric growth.
Objectives of ELI Scheme
- Catalyse formal job creation across sectors, especially labour-intensive manufacturing.
- Support first-time jobseekers entering the formal economy.
- Encourage employers to expand workforce size, especially smaller firms.
- Promote financial literacy and savings among the youth.
- Enhance EPFO-based social security coverage for both employees and employers.
Key Features
Part A – For Employees (Youth Focus)
- Incentive: Equivalent to one month’s EPF wage (up to ₹15,000), disbursed in 2 instalments.
- Eligibility:
- First-time salaried workers (₹1 lakh salary cap),
- Must be registered with EPFO.
- Disbursement Conditions:
- 1st instalment: After 6 months of continuous service.
- 2nd instalment: After 12 months + completion of a financial literacy course.
- Savings Focus: Part of the amount will be locked in a deposit account to instill saving habits.
- Coverage: Targets 1.92 crore new workers.
Part B – For Employers (Formalization Driver)
- Sectoral Focus: Pan-sectoral; additional support to manufacturing firms.
- Incentives:
- ₹1,000–₹3,000 per employee/month for 2 years.
- Extended to 4 years for firms in manufacturing sector.
- Eligibility:
- Firms registered with EPFO.
- Must hire at least 2 employees (if firm <50) or 5 employees (if ≥50).
- New employees must remain for minimum 6 months.
- Wage Slab Incentives:
- Up to ₹10,000 → ₹1,000/month
- ₹10,000–₹20,000 → ₹2,000/month
- ₹20,000–₹1,00,000 → ₹3,000/month
Payment and Monitoring Mechanism
- Employee disbursement: DBT via Aadhaar-based Payment System (ABPS)
- Employer transfer: PAN-linked accounts
- Implementation to be monitored by Ministry of Labour & Employment, with coordination from EPFO.
Expected Outcomes
3.5 crore new jobs across sectors
- 1.92 crore youth brought into formal workforce
- Significant reduction in informal employment
- Boost to manufacturing sector jobs and revival of labour-intensive industries
- Greater financial inclusion and retirement security
Constitutional & Governance Relevance
- Directive Principles of State Policy (Article 41, 43) – Right to work, just conditions, and social security.
- Fundamental Right under Article 21 – Right to livelihood (linked via judicial interpretation).
- Labour as a Concurrent Subject – Ensures both Centre and States can synergize similar employment programs.
Issues and Challenges
- Leakage and ghost beneficiaries unless robust Aadhaar-EPFO validation is ensured.
- MSME hiring hesitancy due to compliance costs.
- Short-term employment risks – employers may game the system for 6-month cycles.
- Gender imbalance – unclear if women workers have specific incentives.
- Manufacturing absorption limits – sectoral mismatch in job demand vs. youth skills.
Way Forward
- Robust Monitoring Framework to ensure job continuity and EPFO compliance.
- Integrate Skilling Programs (e.g., PMKVY) with ELI eligibility for better job readiness.
- Design women-centric variants to reduce female LFPR gap.
- Use labour data analytics for real-time tracking and mid-course corrections.
| UPSC Relevance GS 2 – GovernanceGovernment schemes for employment generation; Role of Ministries and DBT mechanisms; EPFO and Aadhaar integration in social security GS 3 – EconomyFormalization of labour market; Employment elasticity of growth; Labour reforms and youth unemployment Possible Mains Question Q. The Employment Linked Incentive (ELI) Scheme reflects a paradigm shift from production-centric to employment-centric policymaking. Critically examine its potential and challenges in promoting inclusive job growth in India. |