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Budget and Jobs
Context:
The Economic Survey 2025-26 claims that India’s labour force participation rate (LFPR) and worker population ratio (WPR) have increased while the unemployment rate (UR) has declined.
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- However, these claims do not reflect the full reality. In 2017-18, India recorded its highest unemployment rate in history.
- This was followed by an economic slowdown spanning nine quarters until early 2020, after which the COVID-19 pandemic further exacerbated joblessness as the economy contracted at twice the rate of the global average in FY21.
- As a result, approximately 80 million workers were forced back into agriculture, undoing the progress made between 2004 and 2019 in reducing dependency on farming.
- The Economic Survey acknowledges that real wages have remained stagnant for 80% of workers over the past five years, contradicting its own claims about job growth.
Capital Expenditure: Not a Game-Changer for Growth
- Combined Expenditure: The combined capital expenditure of the Union government and central public sector enterprises (CPSEs) is budgeted at 3.7% of GDP for FY26, a slight increase from 3.6% in FY25 but still lower than 3.8% in FY24 and 3.9% in the pre-COVID years.
- This suggests that economic growth is unlikely to see a substantial boost purely based on public capital spending.
- Non-Farm Jobs: Given the collapse of aggregate demand, economic policy, especially post-COVID, should ideally focus on creating non-farm jobs.
- However, the government has instead opted to stimulate demand through personal income tax (PIT) breaks for the middle class, expecting a revival in consumption.
- Yet, given that the middle class has been forced to dip into savings to sustain consumption and that overall consumption growth has been weak, providing tax relief to 30 million PIT payers in a workforce of 600 million is unlikely to generate significant demand, let alone spur private investment or job creation.
Skill Development Initiatives: Quantity Over Quality
- Budget Allocation: The Budget 2025-26 allocates ₹38,746.3 crore to the Ministry of Labour and Skill Development, an 80% increase from ₹21,608 crore in the previous year.
- Additionally, the government plans to invest ₹2 lakh crore over five years to support skill development and internship programs.
- However, concerns persist regarding the effectiveness of such interventions.
- Employability: Despite multiple skill development schemes such as the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY), and the National Apprenticeship Promotion Scheme (NAPS), comprehensive placement data and performance evaluations remain absent.
- The focus appears to be on expanding the number of trained individuals rather than improving training quality.
- As a result, many certificate holders lack real-world skills, reducing their employability.
- Disproportionate Focus on Infrastructure: The government has also proposed the ITI Upgradation Scheme, with a ₹60,000 crore investment over five years to modernise 1,000 Industrial Training Institutes (ITIs) under a hub-and-spoke model.
- However, past experience with similar initiatives, such as the Model ITI scheme, suggests a disproportionate focus on infrastructure rather than curriculum updates or instructor training.
- A mid-term review revealed that nearly 58% of funds were spent on civil works and 31% on equipment, with minimal investment in improving the quality of education.
- Furthermore, there has been no mention of the Internship Scheme announced in Budget 2024-25, which was supposed to provide lakhs of youth with internship opportunities in India’s top 500 firms.
Employment Generation Schemes: A Modest Approach
The Budget introduces three primary schemes aimed at employment generation, but none appear capable of addressing the scale of India’s job crisis:
- Credit Availability Enhancement: The credit guarantee cover for micro and small enterprises has been increased from ₹25 crore to ₹210 crore, with an additional ₹1.5 lakh crore in credit expected to be disbursed over the next five years.
- While this may improve access to credit, its direct impact on job creation remains uncertain.
- Focus Product Scheme for Labour-Intensive Sectors: The government plans to promote employment in sectors such as footwear and leather, but details regarding implementation remain vague.
- Tourism for Employment-Led Growth: The top 50 tourist destinations will be developed in partnership with states under a challenge-based model.
- However, the success of this initiative depends on state governments’ willingness to provide land for infrastructure development.
- Actual Problem: These schemes, while helpful, are insufficient in addressing the country’s pressing employment needs.
- India adds six to seven million new job seekers annually, yet 46% of the workforce remains stuck in agriculture, 100 million youth are neither in education nor employment, and 25 million individuals are currently unemployed.
India’s demographic dividend is set to expire by 2040, when the country transitions into an ageing society. Without significant job creation before then, this dividend could turn into a demographic disaster.
