Unedited Report: Will ELI Lead to Job Creation?
The Indian government has launched a significant initiative, the Employment Linked Incentive (ELI) Scheme, on August 1, 2025, with an aim to bolster formal employment, particularly in the manufacturing sector. The scheme, part of a larger effort announced in the Union Budget 2024-25, has an impressive budget of approximately Rs 99,446 crore.
The ELI Scheme is designed to create over 3.5 crore new jobs within two years (August 2025 to July 2027). It focuses on promoting employment for first-time job seekers and increasing formal job opportunities. The scheme also provides financial incentives for both employees and employers.
For eligible first-time employees, earning up to Rs 1 lakh per month and registered with the Employees' Provident Fund Organisation (EPFO), a one-time wage incentive equal to one month’s salary, capped at Rs 15,000, is offered. This incentive is paid in two instalments over six months via direct benefit transfer. A portion of the incentive is withheld temporarily to encourage savings.
Employers, on the other hand, receive incentives for creating new jobs. For each additional employee retained for at least six months, an employer will get up to Rs 3,000 per month for two years. In the manufacturing sector, this incentive extends to an additional two years, i.e., benefits continue for up to four years.
The ELI Scheme applies to jobs created between August 1, 2025, and July 31, 2027, and is designed for all sectors but prioritises the manufacturing sector. The scheme is divided into two parts: Part A, which supports first-time employees with wage subsidies, and Part B, which provides sustained employment incentives to employers.
The second instalment under the ELI Scheme is a deferred payment in the form of a fixed deposit, paid after completion of a financial literacy programme and 12 months of service.
The money allocated for the ELI Scheme could have been used for improving people's employability through education or skill development. However, the Narendra Modi government places a high importance on job creation in the country. The ELI Scheme is one of five schemes under a Rs 2 lakh crore package for skilling and employment generation, targeting about 4.1 crore youth.
In summary, the ELI Scheme provides direct wage-linked incentives to new employees, primarily first-time workers, and sustained hiring incentives to employers, with special extended support for the manufacturing sector. The aim is to promote long-term job growth and formalization of jobs in India.
The ELI Scheme, with its focus on job creation and formal employment, particularly in the manufacturing sector, is also linked to the country's business and political landscape. This significant initiative, part of a larger budget announced in 2024-25, not only offers financial incentives to first-time employees and employers but also highlights the government's commitment to general-news topics like employment and the economy.
