Employment has always been an important element of recent Budgets, but the difference in Budget 2024-25 is a direct thrust for job creation rather than an indirect one through economic growth, with the focus being on helping first-time job seekers break the Catch-22 quandary of ‘no experience, no jobs’ in the labour market, India’s top Finance Ministry official asserted on Thursday.

“The growth thrust continues and the attempt this time is to increase the employment intensity of that growth. I would see it as an economic imperative, not a political imperative… India needs employment intensity growth which is a factor of what technologies you use and which industries grow faster,” Finance Secretary T.V. Somanathan told The Hindu. 

“We do believe that fiscal incentives have a role at the margin, in what kinds of technological choices are made and what kind of hiring choices are made,” Mr. Somanathan said, adding that economic theory and empirical international evidence indicate that such incentives generally work as an encouragement or ‘nudge’.

“How much they work and how fast is a different matter. For instance, industry constantly asks for fiscal incentives on research and development, or to buy plant and equipment. Now, what we are saying is, if you do more employment, you will get more fiscal benefits… We are hopeful that this will increase the rate at which employment grows for a given level of GDP growth,” the Finance Secretary said.

This does not mean a high-tech industry will suddenly become labour-intensive because of fiscal incentives or a labour-intensive sector will mechanise more in their absence, he explained.

“But at the margin, every industry has choices to make on further automation, or lesser automation, and fiscal incentives matter there. Even in high-tech industries, are you high-tech up to the point of production and then use labour for packaging or do you use robots for packaging? There are decisions to be made there also. And similarly, if you’re a footwear company, you are probably labour intensive. But even then, you have choices of how much do I mechanise?” Mr. Somanathan pointed out.

Breaking entry barriers

The attempt through the employment-linked scheme of incentives announced in this Budget, is to make it easier for firms to hire those who don’t have any previous experience, the top Finance Ministry bureaucrat underlined.

“There is an entry barrier for somebody who doesn’t have experience and we are trying to help penetrate that barrier through a fiscal incentive, so that the period for which a new entrant is perhaps on a learning curve and less productive, we subsidise that and make it more attractive for companies to hire such first timers,” he said.

“So there’s a definite thrust on first-timers breaking into the employment market, overcoming that barrier, and thereby widening the pool of people who are selected,” he noted.