India faces significant skilling challenges, with a large portion of its workforce unprepared for the rapidly evolving job market. On one hand, rapid advancements in AI and automation are poised to replace traditional job roles, creating an urgent need for upskilling and reskilling. On the other hand, a large portion of the Indian workforce remains inadequately prepared for the evolving job market, with outdated skills that could render them unemployable.
The Union Budget 2024-25 addresses these issues with targeted initiatives, including paid internships, ITI upgrades, and financial support for education. These measures aim to bridge the skill gap, enhance employability, and boost economic growth. The article explores how these new skilling programs can help leverage India’s demographic dividend and drive the country towards its goal of becoming a developed economy by 2047.
India is at a critical juncture in its economic growth story, even as it envisions to become a developed economy by 2047. The country is looking to achieve self reliance in several sectors – right from the traditional ones like defence, medical devices, pharmaceuticals, engineering goods, electronics, etc to new age sectors like AI, agritech, automation, EVs, solar, hydrogen, drones and spacetech.
At the same time, the country is grappling with a significant skill gap that threatens its potential to harness its enviable demographic dividend, wherein over 50% of its people are under the age of 25. The Economic Survey highlighted a very disturbing statistic – only around 51.2% of the population is employable (albeit an improvement from 34% over the last decade).
On one hand, rapid advancements in AI and automation are poised to replace traditional job roles, creating an urgent need for upskilling and reskilling. On the other hand, a large portion of the Indian workforce remains inadequately prepared for the evolving job market, with outdated skills that could render them unemployable. The irony lies in the juxtaposition of an AI-driven future, where jobs are scarce for those unprepared, and a young population brimming with potential but facing obstacles in education and skill development. This disconnect could derail India’s economic growth and amplify unemployment, highlighting the urgent need for robust educational reforms and skill development initiatives to bridge this gap and secure India’s place in the global economy.
The government has given special emphasis on addressing this skilling gap in the latest Union Budget 2024-25. It takes motivation from the fact that Indian labour market indicators have got better in the last six years, with unemployment rate declining to 3.2% in 2022-23. There is a positive rise in youth and female participation in the workforce, and net payroll additions under EPFO have doubled over 5 years. This indicates a healthy growth in formal employment and a good opportunity to tip the scales.
Finance Minister Nirmala Sitharaman in Budget 2024-25 announced various initiatives towards the skilling and employment of youth. “In this Budget, we particularly focus on employment, skilling, MSMEs, and the middle class,” Sitharaman said. “This year, I have made a provision of ₹1.48 lakh crore for education, employment, and skilling.”
To enhance the skills of the youth, a year-long paid internship opportunity will be provided to 1 crore youth in the country’s top 500 companies over the next five years. This 12-month internship will give them real-world business experience, exposing them to different professions and job opportunities. The students will receive a stipend of ₹5,000 and a one-time support payment of ₹6,000. Companies are required to cover the internship costs and contribute 10% of these expenses through their CSR funds.
The budget also plans to upgrade 1,000 Industrial Training Institutes (ITIs) over the next five years, in collaboration with the industry, to make the youth job-ready. This will be done through the hub-and-spoke model, backed by a total allocation of ₹60,000 crore. The initiative features a new Centrally Sponsored Scheme created in partnership with states and industry to ensure high-quality and relevant skilling outcomes. The budget allocation includes ₹30,000 crore from the Government of India, ₹20,000 crore from state governments, and ₹10,000 crore from industry contributions, including CSR funds. This upgradation will restructure existing courses, plan new courses, and offer focused short-term programs at hub ITIs. Moreover, the capacity of five national institutes for trainer training will be expanded.
This initiative aims to benefit 20 lakh students, improving the alignment of ITI training with industry demands and establishing a strong foundation for workforce development. Prime Minister Narendra Modi, in his post-Budget remarks, said these measures will enable young people from villages and impoverished backgrounds to work in top companies, opening new doors of possibility for them.
Additionally, the Finance Minister revised the Model Skill Loan Scheme to facilitate loans up to ₹7.5 lakh for each student with a guarantee from a government-promoted fund, benefiting 25,000 students annually. She also announced financial support for loans up to ₹10 lakh for higher education in domestic institutions for students not eligible for any government schemes and policies. “E-vouchers for this purpose will be given directly to 100,000 students every year for annual interest subvention of 3% of the loan amount,” she said.
Sumit Kumar, Chief Strategy Officer of staffing firm TeamLease Degree Apprenticeship, said the upgraded skilling program, such as revised model skill loans and financial support for higher education through e-vouchers, would enhance and foster skill development tailored to market demands. “The comprehensive internship scheme, offering real-world experience and supported by CSR funding, is a welcome addition that bridges the gap between education and practical experience,” he said. Integrating apprenticeships could further strengthen the link between education and employment by offering structured, hands-on training opportunities, Kumar added. “Together, these initiatives are set to address skill gaps, boost youth employability, and cultivate a more skilled and inclusive workforce.”
As a move to support employment opportunities and skilling initiatives in the country, FM Nirmala Sitharaman launched the Prime Minister’s package. This initiative aims to benefit 4.1 crore youth over the next five years, with a central allocation of ₹2 lakh crore. A major highlight of the budget is the three schemes under ‘Employment Linked Incentive’, which directly link incentives to employment generation, ensuring that growth benefits are widely distributed. These schemes are based on enrollment in the EPFO.
Scheme A: One Month’s Salary for Freshers Newly joined individuals in the workforce in all formal sectors will receive a one-month wage. Freshers registered with the EPFO will get a direct benefit transfer of up to ₹15,000, allocated in three installments. The monthly salary cap is set at ₹1 lakh, which is expected to aid 210 lakh youth.
Scheme B: Employment Generation in Manufacturing This scheme will encourage the creation of additional jobs in the manufacturing sector by providing incentives for hiring first-time employees. Both employees and employers will receive incentives based on their EPFO contributions during the first four years of employment.
Scheme C: Support to Employers This scheme is anticipated to support 30 lakh youth and create additional employment across all sectors. It will reimburse employers up to ₹3,000 per month for each new employee’s EPFO contribution for two years. The initiative is expected to boost employment for around 50 lakh people, thereby raising overall employment rates.
As the fifth scheme under the Prime Minister’s package, the government will launch a comprehensive scheme to provide internship opportunities in 500 top companies to 1 crore youth over five years. This will help them gain exposure to real-life business environments, varied professions, and employment opportunities for 12 months. An internship allowance of ₹5,000 per month, along with a one-time assistance of ₹6,000, will be provided. Companies will bear the training cost and 10% of internship cost from their CSR funds.
The diverse skilling initiatives outlined in the Union Budget 2024-25 hold immense potential to boost India’s economy by effectively leveraging its demographic dividend. By focusing on real-world training, industry collaboration, and financial support for education, these programs aim to bridge the existing skill gap and prepare the workforce for future challenges. With improved employability, increased youth and female workforce participation, and incentives for job creation, India can ensure sustainable economic growth. These measures not only empower individuals but also enhance the nation’s competitiveness, fostering a more skilled and inclusive workforce poised to drive India’s ascent as a global economic leader.
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