THE central government has come up with an employment-linked incentive (ELI) scheme with an outlay of Rs 2 lakh crore for 5 years in the 2024-25 Union Budget. The scheme is said to be framed to create jobs and to enable skilling the youth for employment. It consists of Rs 1.07-lakh crore Plan A, Plan B & Plan C funding to enable 3.1 crore employment generation, Rs 63,000 crore for internship programme for skilling 1 crore youth in 5 years, and Rs 30,000 crore for upgradation of Industrial Training Institutes (ITIs).

The Pradhan Mantri Internship Scheme envisages to skill 1 crore youth aged 21 to 24 years over 5 years in top 500 companies.  The government will pay stipend of Rs 5,000 per month and one-time assistance of Rs 6,000 to the interns and the companies may spend their corporate social responsibility (CSR) funds for other expenses of training. Skilling 1 crore youth over 5 years means skilling on an average 20 lakh youth per year in 500 companies, or an average 4000 youth per year in a company. The government has initiated a pilot project to start from December 2 with the target of skilling 1.25 lakh youth with an allocation of Rs 800 crore for 2025.  

The Plan A envisages government paying Rs 15,000 to the new recruit enlisted as a new subscriber of the Employees Provident Fund Organisation. Plan B envisages to pay the employees’ and employers’ share of EPFO in manufacturing sector, calculated as 24 per cent of the salary component for first two years and 16 per cent and 8 per cent for 3rd and 4th year if the employer employs at least 50 new workers or 25 per cent of previous years' number enlisted on EPFO through the company. Plan C envisages to pay employer contributions to EPFO of up to Rs 3,000 per month for 3 years for all sectors, if the company with less than 50 employees recruits at least 2 new employees and company with 50 or more employees, recruits at least 5 new employees. A beneficiary under Plan B or Plan C can be a beneficiary under Plan A also.

The Union Budget 2019-20 announced the production-linked incentive (PLI) scheme with an outlay of Rs 1.97 lakh crore spread over 5 years for 14 sectors and it has now been expanded to total 16 sectors in the 2024-25 Union Budget. It provides incentive ranging from 3 per cent to 20 per cent on the net additional year-on-year incremental sales increase done by a company over the base year. It was launched in the name of generating jobs in manufacturing sector, import substitution with increase in exports, increasing the contribution of manufacturing sector to the GDP to 25 per cent.

The beneficiaries of PLI are contract manufacturers of iPhone – Wistron (Now TISS Tata’s owned), Foxconn, Pegatron and Samsung and so on. Automobile manufacturers Suzuki, Toyota, Tata Motors, KIA, Ashok Leyland, Mahindra & Mahindra, Mitshubshi, Elcher, etc and auto components manufacturers like Bosch, Toyota Group industries and so on are also beneficiaries. Hermes 900 Drone missile manufacturing Elbit - Adani Defence & Aerospace Company and other 10 component suppliers to it are also approved beneficiaries. These drones are said to be used by Israel to bomb Gaza and by Ukraine to bomb Russia.    

Similarly, the design-linked incentive (DLI) scheme and the capital investment expenditure incentive (Capex incentive) for the semiconductor industries were framed. The first phase of the Capex incentive was given an outlay of Rs 76,000 crore. The plants at Sanand in Gujarat were allocated               Rs 49,000 crore of it. Incentive was for assembly and testing plants which was 30 per cent of the capital investment expenditure for conventional packaging and 40 per cent for advanced packaging in 2021 raised to 50 per cent in 2022.

The beneficiaries of Capex incentive are Tata’s with Taiwan’s Company, Muregappa’s CG Power with Japan’s Renesas, Kaynes Semiconductor and American Micron Technologies. 70 per cent of American Micron Company investment is subsidised through this, leading to subsidy of Rs 3.2 crore for every job created in it.

The discussions for framing Capex incentive scheme 2.0 with Rs 1.26 lakh crore outlay for semiconductor and chip components manufacturing are going on. PLI scheme for component manufacturing in electronics is said to be sought by the corporates with an outlay of Rs 35,000-45,000 crore to reduce the import bills incurred due to PLI 1.0 scheme for the electronics manufacturing sector.

As many as 140 beneficiary companies of the PLI scheme participated in a meeting held on September 29 to mark a decade of the Make in India initiative by the Ministry of Industries and Commerce. It was reported therein that Rs 1.46 lakh crore out of the Rs 1.97 lakh crore outlay for the PLI scheme has been spent with the rest to exhaust in 2024-25 and Rs 76,000 crore earmarked for the Capex incentive has also been exhausted. The meeting deliberated on ease of public sourcing regarding liberalising public procurement rules to encourage localisation of production, thereby the corporates are urging for market through government procurement of commodities produced through these incentive schemes. 

The participants have urged for allowing Chinese technicians to overcome the bottleneck in manufacturing sector and Chinese capital in electronics manufacturing to reduce the increasing import bill in the sector as the localisation in mobile manufacturing is hardly 20 per cent and the rest is imported from China.

A CMIE survey reveals that out of the announced private investment projects worth Rs 92.33 lakh crore during 2014-2023, only Rs 24.22 lakh crore, or 26.33 per cent, are realised during the period. Further the share of productive assets such as machinery in gross fixed capital formation (GFCF) has fallen to 33.9 per cent from 35.8 per cent during 2016-2023. Share of dwellings, other buildings and structures has risen to 55.4 per cent from 52 per cent. The share of public capital expenditure by the central government is more than private capital expenditure. In spite of a sharp increase in the Centre’s Capex, as CPSEs' investment has fallen, together the Capex of both the Centre & CPSEs has declined to 3.9 per cent of the GDP in FY24 from 4.9 per cent in FY20.

The World Investment Report 2024 reveals that the share of inflow of FDI has fallen from 6.5 per cent in 2020 to 2.1 per cent in 2023. Decadal average growth rate in FDI inflows was 50.1 per cent in 1990s, reduced to 30.7 per cent in 2000s, and has fallen to 4.6 per cent in 2010s. Inflows into greenfields also declined from 49 billion dollars in 2022 to 28 billion dollars in 2023.

The WTO’S Global Trade Outlook and Statistics report says India accounts for 1.8 per cent of global exports of goods and export of goods has contracted by 4.71 per cent in 2023. Global Trade Research Initiative (GTRI) says Indian exports and imports dipped by 2.6 per cent in 2023 compared to 2022.

The share of contribution from manufacturing sector to GDP, which was 17 per cent in 2010, dropped to 15 per cent in 2014 and to 13 per cent in 2023. As per Periodic Labour Force Survey, the share of workers in manufacturing sector, which was 12.1 per cent in 2018-19, has declined to 11.4 per cent in 2023-24. As per Annual Survey of Indian Industries (Factory Division) 2022-23, the share of wages in net value addition is 15.97 per cent, while the share of profit is 51.92 per cent. The Economic Survey 2023-24 has said that India needs to generate 78.5 million jobs annually to cater to the unemployed youth.     

The dismal state of employment generation, contracting exports- increasing imports, low percentage of realisation and completion of the announced private projects, lowering percentage of FDI inflow and declining contribution of the manufacturing sector to GDP reveal that the earlier schemes of PLI, DLI and Capex incentive have not yielded the expected results.  Rather the schemes are subsidising the cost of investment through Capex incentive and production cost through PLI and now employment cost through ELI. The proposed ELI scheme, Capex incentive 2.0 and PLI 2.0 for electronics components manufacturing shall only further the corporates to siphon off lakhs of crores from the public exchequer as done in the earlier schemes of incentivising economy initiated by the decade-long Narendra Modi-led government.

The ELI scheme, instead of enabling creation of jobs, will only promote the fixed-term natured employment and provide free manpower in the form of interns for the next 5 years to top 500 companies and create a huge reserved army of skilled unemployed along with subsidising the cost to the company incurred enabling the corporates to usurp higher surplus value at the cost of public exchequer.     

The incentivising of economy means an unseen pipeline to corporates to siphon off the public funds through budgetary allocation. These schemes reveal the crux of economic interest of the corporate-communal nexus in governance, depicting cronyism of capital to the core in the neo-liberal era.