The Modi Government is in denial about India’s unemployment crisis. PM Modi has in fact claimed that India created eight crore new jobs in the last 3–4 years. The Economic Survey 2023–24 claims that there has been a reduction in unemployment and the country’s unemployment rate is at a lowly 3.2 percent. The FM’s budget speech does not even mention the word unemployment.[1]

Nevertheless, one of the biggest announcements made by FM Nirmala Sitharaman in her budget speech relates to employment generation: “In this budget, we particularly focus on employment, skilling, MSMEs, and the middle class. I am happy to announce the Prime Minister’s package of 5 schemes and initiatives to facilitate employment, skilling and other opportunities for 4.1 crore youth over a 5-year period with a central outlay of Rs. 2 lakh crore.” The news media went ga-ga over this announcement, with every important newspaper and TV channel highlighting it.

On the face of it, the allocation looks fairly large, Rs. 2 lakh crore, but if we read carefully, this is over five years, which means that the actual allocation per year is only Rs. 40,000 crore! That is actually not very large for a problem so massive like the unemployment crisis. It is less than half of the allocation for MGNREGS, which itself is hugely underfunded. But before discussing the financial allocation for the Prime Minister’s employment package, let us first take a look at the details of the schemes announced by the FM, which took up a considerable part of her budget speech.

The first three schemes are all effectively wage subsidy schemes.

The first scheme is for companies in all sectors hiring first time workers, registered with the EPFO; it proposes to provide first month’s wage to all such employees, up to a ceiling of Rs. 15,000. It will be in force for 2 years.

The second scheme is also a kind of wage subsidy scheme — this is for companies in the manufacturing sector hiring first time employees (registered with the EPFO); the wage subsidy would be paid partly to the employer and partly to employees. The total wage subsidy paid per employee would be 25 percent of the salary for employees earning up to Rs 1 per month; for those earning above Rs 25,000 per month, the wage subsidy would be restricted to the salary of Rs 25,000. This subsidy would be provided for 4 years, with the subsidy coming down to 4 percent of the salary by the fourth year.

The third scheme provides a subsidy for employers hiring additional workers. Under this scheme, the government will reimburse their EPFO employer contribution up to Rs. 3,000 per month for two years.

The FM expects these 3 schemes to benefit a total of 2.9 crore youth over a period of 2 years, or around 1.45 crore youth a year.[2]

All these schemes are based on supply side economics, a much influential economic theory of today’s times. The logic behind it is that 2.9 crore jobs are there for the asking, corporates only need to be given a small incentive for them to start hiring. There are two common sense problems with this expectation of the FM.

Because of the dismantling of labour laws over the past two decades, corporates are now increasingly hiring contract workers in place of regular workers. These schemes are aimed at pushing them to hiring regular workers, for which the government has offered to bear a small part of their salaries for a limited period. If at all these companies decide to avail of these schemes, they would prefer to regularise their contract workers, rather than hire new workers. In that case, there would be no new job creation.

But there is a more important problem with the FM’s hope that these wage subsidy schemes will increase employment. It transgresses a basic logic of capitalist production. Corporations are solely oriented towards maximising profits, and one of the ways of maximising profits is hiring minimum number of workers at the minimum possible wages. Why will they avail of these wage subsidy schemes and increase their wage bill? Corporations only increase production and hence employment if there is an increase in demand. In case there is no increase in demand, they prefer to work at less than full capacity.

We need to remind the FM that she had given corporate houses a tax cut of Rs. 1.5 lakh crore a year just some years ago. The government had hoped that they would use it to increase production and employment. But the corporations did nothing of that sort. They simply gulped down the tax cut to increase their profits, without increasing production and employment. The reason is simple — corporations only increase production if there is an increase in demand; giving them a tax cut does not increase demand. That can only increase if the government increases the purchasing power of the people, like for instance by increasing its social sector expenditures. More on this later.

The fourth scheme is a 12 months ‘Prime Minister’s Internship’ program, wherein the government expects the 500 top corporates in the country to hire 1 crore interns in five years. The government would give these interns a monthly allowance of Rs. 5,000 per month plus one-time assistance of Rs. 6,000, for which youth aged 21 to 24 will be eligible.

This is even more unlikely to succeed. Large companies in the private sector have been unwilling to take on apprentices. It is doubtful if they can be encouraged to hire interns (another name for apprentices) only because the government is offering them a stipend — and that too in such a large number (each company is expected to hire around 4,000 interns in a year). Most large companies do not have the physical or human resource infrastructure to undertake training; setting those itself will cost money, and it is not clear why they will do that.

The fifth scheme is a skilling program, wherein the government plans to upgrade 1,000 Industrial Training Institutes, and give training to 20 lakh youth over a period of 5 years, in the hope that they will get a decent job after this training.

The Finance Minister is not sure whether those availing of this training will be able to get jobs in companies. So she has also announced that the government will provide ‘Skilling Loans’: “The Model Skill Loan Scheme will be revised to facilitate loans up to Rs. 7.5 lakh with a guarantee from a government promoted Fund.” The problem is that already, the Mudra loans scheme is not being able to generate any significant amount of jobs. Around 80 percent of the Mudra loans sanctioned are ‘Shishu Loans’ of less than Rs. 50,000.[3] Obviously, this amount is too inadequate to set up any kind of business. How will a new loan scheme help to create more jobs?

As we have discussed in Article 2 of this budget series (published in Janata Weekly), the majority of the jobs in the economy are of self-employed workers. As per PLFS data, of the total employment in the country, the percentage of self-employed workers increased from 52.2 percent to 57.3 percent (actually 47.7 percent if we exclude unpaid helpers) over the period 2017–18 to 2022–23. Their average real monthly earnings had actually declined over the period 2017–18 to 2021–22, and only crossed the 2017–18 level in 2022–23 to reach Rs. 13,347. As discussed in Article 3 of this budget series (published in Janata Weekly), the majority of the self-employed workers earn poverty wages. So, even if the workers skilled under the government’s new skilling program do take a loan and become self-employed, most of them will barely be earning enough to somehow stay alive.

On the whole, the Prime Minister’s package for employment (the first four schemes mentioned above) hopes to provide employment to 1.6 crore youth in the first year, of whom 1.45 crore would be employed as regular workers in companies, and another 15 lakh would be taken on as interns by large companies. This proposal becomes irrational for another reason. At present, there are 1.72 crore people working in all the factories in India (of whom 1.36 crore are workers).[4] The government is thus expecting them to double the number of workers employed by them! Even if the government doubles or triples the subsidy it is offering them under these schemes, they will not take on so many workers and interns.

But Where Is the Money?

As cited above, the FM says in her budget speech that the total central outlay for the Prime Minister’s Package for Employment and Skilling is Rs. 2 lakh crore over 5 years. This means the outlay this year should be Rs. 40,000 crore. But in the very next breath, she says that she has “made a provision of Rs. 1.48 lakh crore for education, employment and skilling.” The education budget this year is Rs. 1,20,628 crore. This means that she has allocated around Rs. 28,000 crore in this year’s budget for employment and skilling, and not Rs. 40,000 crore.

But a close examination of the budget papers reveals that the only new allocations she has made for employment and skilling in this year’s budget estimates are:

• Rs. 10,000 crore for ‘New Employment Generation Scheme’ under the Ministry of Labour and Employment.
• Rs. 2,000 crore for ‘New Internship Programme’ under the Ministry of Corporate Affairs.
• Rs. 1,000 crore for ‘New ITI Upgradation Scheme’ under the Ministry of Skill Development and Entrepreneurship.

We have not been able to find any other allocations for the employment related schemes announced by the FM in the budget papers. Media reports on these employment schemes also mention just these three allocations.[5] The total allocation is only Rs. 13,000 crore, and not Rs. 28,000 crore. That’s all. With such a tiny allocation, the FM hopes to generate 1.6 crore jobs!

This only means that the employment schemes announced by the FM, which made such a big splash in the news media, are only a jumla. This is borne out by another important fact.

If the FM Is So Concerned About Employment Generation …

then why is it strangulating Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) — a scheme which has proven its efficacy during the past decade in creating jobs in the rural areas. The Act that codifies this scheme has been passed by the Parliament. It mandates that the government provide 100 days of work in a year to every willing household. Despite that, the government has not been allocating it the necessary funds, because of which the scheme has been able to provide only around 50 days of work in a year to each household. Crores of people seeking work under this scheme have been denied work, which is also a violation of the Act. We discuss this scheme in greater detail in the next article, while analysing the agriculture budget.

Another sure way in which the government could have generated employment directly is by expanding MGNREGS to urban areas and increasing its entitlement beyond 100 days.

Both the above programs can only provide temporary relief from unemployment, they provide what can be called distress employment. A better way of creating decent, well paid jobs in the economy is by increasing the government’s social sector expenditures. Let us discuss this in greater detail.

Social Sector Expenditure and Employment

We have pointed out in Article 6 that within its stagnant budget outlay, the Modi Government has hugely increased its capital expenditure, and to compensate for this, has reduced its social sector expenditures. This is an important reason for India’s terrible employment crisis. Let us explain.

In the face of lack of demand due to poverty and unemployment, capex is not going to lead to increase in private investment and hence employment as we have argued in the previous articles of this budget series. Not only that, much of the capex only goes towards boosting imports of capital goods, rather than strengthening domestic production. This further reduces the employment generation that should have taken place with increase in capex.

It is well established economics that rupee for rupee, public social sector expenditure is more employment generating than public capital expenditure. Furthermore, in a situation where the country is facing such a terrible unemployment and poverty crisis, an increase in expenditure on social services puts purchasing power in the hands of people, and so pushes the private sector to invest in creating productive capacity, thereby leading to employment generation in the private sector too.

Even within the capitalist framework, there is a huge potential for creating public sector jobs in India in the social sectors. To make an estimate of this, let us compare public employment in India with that in the developed countries. The Modi Government has been claiming that it is working hard to transform India into a developed country. While it is true that the developed countries — from Germany, France and the United Kingdom to the USA — are all free market economies or capitalist economies, our readers would be surprised to know that the number of people in public employment as a percentage of the total population in the developed countries is as much as 7 to 14 times that of India (Table 8.1)! The reason why public sector employment in these countries is so high is because governments in these countries spend huge sums to provide social services to their people. In contrast, as we have discussed in the previous article of this budget series (published in this issue of Janata Weekly), the Indian Government’s social sector expenditures are very low.

Table 8.1: Public Sector Employment as % of Total Population [6]

Sweden	14.29
France	8.62
UK	8.08
USA	6.84
India	1.28

The USA has one of the lowest levels of public sector employment among the developed countries — 6.84 percent of its population is employed in public sector jobs. This ratio for India is even lower at just 1.28 percent. Even if India were to increase its social sector expenditure to bring public employment in the country to half that of the USA, India’s public employment would increase to 4.7 crore.[7] India’s public sector employment is around 1.7 crore at present.[8] This means the creation of an additional 3 crore jobs in the social sectors!

Can so many public sector jobs be created in the social sectors?

For many of our readers, the creation of an additional 3 crore jobs in the social sectors will appear to be unbelievable. But actually it is not so, it is eminently feasible. Let us consider just one sector, the school education sector, where conditions are simply terrible. Our schools suffer from a huge shortage of teachers (we discuss this in a later article of this budget series). We have estimated elsewhere that the total number of teachers that need to be recruited to improve the quality of school education in the country is around 86 lakh.[9] This figure is for both government and private schools. Government and government-aided schools account for two-thirds of all teachers, and three-fourths of all schools in the country. Therefore, we can assume that the government would need to recruit around 60 lakh teachers to improve the quality of school education in the country and bring it to near international standards (by this, we mean bringing back all the out-of-school children back to school, having 1 teacher per classroom in all the schools in the country, and reducing the student-teacher ratio to around 30). Furthermore, the creation of so many teaching jobs in government schools would lead to the creation of at least 90 lakh jobs in the private sector too.[10]

Another important proposal for creation of jobs in the economy

If we are to tackle India’s grim unemployment crisis, our economic development model will need to focus on creation of jobs — which is not the central orientation of the present neoliberal development model being implemented in the country. After three decades of implementation of neoliberalism in India, it is obvious that the large-industry centred Western model of development cannot generate the massive number of jobs required for an underdeveloped country like India.[11] For this, we will need to focus on developing decentralised and small-scale production, especially village based industries in the rural areas. This will require that the government provide financial incentives for the development of these industries — including making available easy loans at low interest rates for those wishing to set up small units. This also means that the government needs to substantially scale up its budget allocation for this — as the interest subsidy would have to come from the budget.

But only this much would not be sufficient. It would also require that the government takes steps to change the economic atmosphere in the country, and create conditions in which small scale industries can flourish. For instance, instead of building huge coal / gas / hydro / nuclear based electricity generation plants, we need to focus on building small hydro or renewable energy based power houses. This will also require, among other things, that the government reserve production of several items for the small scale sector, and ban imports of these items — to protect this sector from unfair competition with subsidised products of recession-hit automated plants of Western multinational corporations.

All this will require a considerable increase in budget outlay, and a huge increase in the government’s social sector expenditures. Is that possible? We discuss this in later articles of this budget series that will be published in the coming issues of Janata Weekly.

Notes

1. See Article 2: India’s Unemployment Crisis, published in Janata Weekly, January 5-12, 2025.

2. See the Budget Speech of the Finance Minister, Union Budget 2024. Similar details also given in: Prime Minister’s Package Worth Rs. 2 Lakh Crore Central Outlay Announced, 23 July 2024, https://pib.gov.in.

3. “83% MUDRA Loans Under Rs 50,000, What Kind of Business Can Be Done from that Amount: Chidambaram”, 9 April 2023, https://www.thehindu.com; for actual data of number of beneficiaries, see PMMY Reports, https://www.mudra.org.in.

4. Annual Survey Of Industries 2021–2022, Summary Results For Factory Sector, https://www.mospi.gov.in.

5. See for instance: “Budget 2024–25: Centre Introduces Cash Transfers, Internships, EPFO Incentives to ‘Drive Job Creation’”, 24 July 2024, https://www.downtoearth.org.in; “Budget 2024: All You Need to Know About the new Employment-Linked Incentive Scheme”, 23 July 2024, https://www.businesstoday.in.

6. Calculation done by us. For developed countries, public sector employment data taken from: “Employment in General Government”, given in Government at a Glance 2023, OECD, p. 181, https://www.oecd-ilibrary.org; total employment figures taken from: OECD Labour Force Statistics 2022, https://www.oecd-ilibrary.org; population figures taken from: Population, Total – OECD Members (population figures for 2022), https://data.worldbank.org. Public sector employment figure for India taken from: R. Nagaraj, “Public Sector Employment: What has Changed?”, 2014, http://www.igidr.ac.in. It gives data for 2012. The Modi Government has stopped releasing public sector employment figures; we assume that public sector employment in India is the same as it was in 2012, though it has fallen considerably since then. Population figure for India for 2022 taken from: Census of India 2011: Population Projections for India and States 2011–2036, Ministry of Health and Family Welfare, November 2019, https://nhm.gov.in.

7. Total population in 2022 was around 137.37 crore (Taken from: Census of India 2011: Population Projections for India and States 2011–2036, ibid); 137.37 x 6.84/100 x0.5 = 47.

8. R. Nagaraj, op. cit. We assume that the total public sector employment has remained the same as in 2012. Since then, the permanent public sector employees have not increased; the increase has only been in contractual employment, so we are not including them in the public sector employment.

9. See our booklet: The Unemployment Crisis: Reasons and Solutions, Chapter VII, December 2020, Lokayat publication, https://lokayat.org.in.

10. Ibid., Chapter VII.

11. Ibid., Chapter IV.

(Neeraj Jain is a social–political activist with an activist group called Lokayat in Pune, and is also the Associate Editor of Janata Weekly, a weekly print magazine and blog published from Mumbai. He is the author of several books, including ‘Globalisation or Recolonisation?’ and ‘Education Under Globalisation: Burial of the Constitutional Dream’.)