Overview of the Employment-Linked Incentive (ELI) Scheme

What is the Employment-Linked Incentive (ELI) Scheme?

The Employment-Linked Incentive (ELI) scheme is a proposed initiative designed to enhance job creation and skill development within India's expanding workforce. Introduced in the 2024-25 Budget, this scheme aims to offer financial incentives to both employers and job seekers, specifically targeting first-time employees and recent graduates entering the job market.

Provisions of the ELI Scheme

Several key provisions characterize the ELI scheme:

• Publicly Funded Internship Programme: This initiative will provide internships in 500 leading Indian firms over the next five years, allowing job seekers to gain essential on-the-job training and exposure to professional environments, thereby bridging the gap between academic qualifications and industry needs.
• Direct Benefit Transfers for First-Time Employees: The scheme proposes a direct benefit transfer (DBT) of up to ₹15,000, distributed in three installments to all first-time employees in formal sectors. This financial assistance aims to ease the transition into employment by covering initial costs and motivating young workers.
• Incentives Linked to EPFO Contributions: Financial incentives will be provided based on contributions to the Employees’ Provident Fund Organisation (EPFO) by employers and first-time employees in the manufacturing sector. This encourages formal employment and ensures young workers gain access to social security benefits from the outset of their careers.
• Monitoring and Compliance through AI Technologies: The scheme will utilize AI-driven technologies to monitor hiring practices, ensuring that only eligible new employees benefit from the incentives. This measure aims to prevent fund misuse and guarantee that the scheme effectively supports genuine job creation.

Significance of the ELI Scheme

The ELI scheme holds substantial significance for India's employment landscape:

• Boosts Youth Employment: With India needing to create 7.85 million non-farm jobs annually until 2030, the ELI scheme is vital for tackling unemployment among educated youth. By incentivizing companies to hire fresh talent, it helps address the skills mismatch in the job market.
• Enhances Skill Development: The publicly funded internship program targets the skill gap among fresh graduates. By providing real-world industry exposure, it prepares young job seekers for future employment, enhancing their competitiveness.
• Encourages Formal Employment: The scheme promotes formal employment by linking financial incentives to EPFO contributions. This not only grants new employees access to social security benefits but also urges companies to adopt transparent and formal hiring practices.
• Supports India’s Manufacturing Growth: As India aims to position itself as a global manufacturing hub, the ELI scheme fosters a skilled workforce equipped to meet the industry's demands.
• Addresses Demographic Challenges: With a significant youth population entering the labor market, the ELI scheme is crucial for converting potential demographic pressures into economic strengths through job creation and skill enhancement.

Conclusion

The ELI scheme represents a timely intervention in India’s employment landscape. By providing targeted financial support, improving skills, and promoting formal job creation, it addresses critical challenges in the labor market, paving the way for a more robust and inclusive economic future.

Frequently Asked Questions (FAQs)

Q1. What is the main objective of the ELI scheme?
Answer: The ELI scheme aims to boost job creation and enhance skill development among India's workforce, particularly targeting first-time employees and fresh graduates.

Q2. How does the ELI scheme support skill development?
Answer: It includes a publicly funded internship program that provides on-the-job training, helping young job seekers gain essential skills and industry exposure.

Q3. What financial support does the ELI scheme offer to new employees?
Answer: The scheme proposes direct benefit transfers of up to ₹15,000 for first-time employees, distributed in three installments to aid their transition into the workforce.

Q4. How does the ELI scheme encourage formal employment?
Answer: It ties financial incentives to contributions made to the Employees’ Provident Fund Organisation (EPFO), promoting transparency and access to social security benefits for new hires.

Q5. What role does AI play in the ELI scheme?
Answer: AI technologies will monitor hiring practices to ensure that only eligible employees benefit from the incentives, preventing misuse of funds and supporting genuine job creation.

UPSC Practice MCQs

Question 1: What is the primary focus of the Employment-Linked Incentive (ELI) scheme?
A) Reducing taxes for employers
B) Boosting job creation and skill development
C) Increasing exports from India
D) Simplifying business regulations
Correct Answer: B

Question 2: Which of the following is a provision of the ELI scheme?
A) Tax exemptions for companies
B) Publicly funded internship program
C) Wage increases for existing employees
D) Free education for all graduates
Correct Answer: B

Question 3: How much direct financial support does the ELI scheme propose for first-time employees?
A) ₹5,000
B) ₹10,000
C) ₹15,000
D) ₹20,000
Correct Answer: C