By Nageshwar Patnaik in Bhubaneswar, August 20, 2024: A stronger present makes the future better. India’s present is stronger like never before as it is home to a vibrant and growing youth population, with over 38.2 crore individuals aged 10-24 with a median age of 28. This demographic dividend comes as a blessing for economic advancement paving the way towards a promising future. At the same time, it also poses huge challenges in areas such as education, employment, gender equality, and healthcare.

Youth empowerment is stated to be one of the most anticipated pillars of this year’s Union Budget. It establishes a strong foundation for a skilled workforce that can drive India toward becoming a “Viksit Bharat” (a developed Nation). According to the India Employment Report (IER) 2024, created jointly by the Institute for Human Development and the International Labour Organisation (ILO), India’s working population increased from 61 percent in 2011 to 64 percent in 2021, and it is projected to reach 65 percent in 2036. However, the percent of youth involved in economic activities declined to 37 percent in 2022.

Unemployment rate in India rose sharply to 9.2 per cent in June 2024 from 7 per cent in May 2024, according to the Centre of Monitoring Indian Economy (CMIE)’s Consumer Pyramids Household Survey. The unemployment rate increased in both rural and urban India. Rural unemployment rate rose to 9.3 per cent in June from 6.3 per cent in May. Urban unemployment rate climbed from 8.6 per cent to 8.9 per cent. Unemployment rate increased in June alongside a rise in labour participation rate (LPR) and a fall in employment rate. LPR in India stepped up to 41.4 per cent in June, from 40.8 per cent in the previous month. Employment rate, which is the proportion of employed persons in the working age population, fell from 38 per cent to 37.6 per cent in June 2024.

The IER report further pointed out that the female labour force participation rate in India is low in contrast to the world average of 53.4% (2019). Women are forced to withdraw from the workforce due to childcare responsibilities. To encourage women’s participation in the workforce, the government will set up hostels and crèches in collaboration with industry partners.

As a whole, the Union Budget – 2024 addresses the youth issue in bits and pieces. Presenting the Budget, Finance Minister, Nirmala Sitharaman announced the Prime Minister’s package of 5 schemes and initiatives that strive to facilitate employment, skilling, and other opportunities for 4.1 crore youth over a 5-year period with a central outlay of Rs. 2 lakh crores. The three employment-linked incentive schemes have also been introduced in the Union Budget 2024 including, Scheme A (First Timers), Scheme B (Job Creation in Manufacturing), and Scheme C (Support to Employers).

Scheme A is a promising initiative with potential for significant impact. Targeting 2.1 crore youth over 2 years, it offers a one-month wage subsidy of up to Rs. 15,000, paid in 3 installments, for first-time employees earning up to Rs. 1 lakh per month The wage subsidy for first-time employees could effectively jumpstart careers for millions of young people, while the financial literacy requirement adds valuable long-term benefits. Scheme B’s focus on manufacturing could potentially benefit 30 lakh youths, while Scheme C’s broader application across all sectors, coupled with EPFO contribution reimbursements, presents a compelling incentive for workforce expansion.

However, the success of these schemes relies on many factors. Some of them include the manufacturing sector’s capacity to welcome new entrants, with the willingness of employers to navigate potential bureaucratic hurdles, and the alignment of internship programs with the requirements of the industry. While these schemes show promise, their long-term impact on structural unemployment and skill development remains to be seen.

Nearly, 82% of the workforce engages in the informal sector, and nearly 90% is informally employed, the report underlined. Further, a significant proportion of regular workers in the formal sector are informal — “informalisation” of the formal sector is a visible development — this trend was accentuated between 2019 and 2022, as reflected in the decline in the proportion of regular formal workers or better-quality work. However, investments in social sector employment schemes have drastically gone down and shifted towards newer initiatives. This redirection of funds away from established employment programmes has further complicated efforts to tackle the unemployment crisis.

For instance, one significant scheme, the MGNREGA, which guarantees 100 days of wage employment per year to every rural household willing to do unskilled manual work, saw a similar trend. Although demand for MGNREGA work peaked at 133 million people during the Covid-19 crisis, it has since decreased to 93 million in 2023. Budget allocations for MGNREGA between 2019-20 and 2023-24 have been consistently lower than revised estimates, with the 2022-23 and 2023-24 allocations being one-fourth and one-third, respectively, of the previous year’s revised estimates.

The India Skills Report (ISR) 2024, which reveals that only 50.3% of graduates from higher educational institutions are considered employable. The Economic Survey 2023-24 highlights a critical issue i.e 65% of India’s population is under the age of 35, and many lack the skills needed by a modern economy. The survey also states that only about 51.25% of the country’s youth is deemed employable, meaning that approximately one in two graduates are not readily employable straight out of college.

Addressing these issues, fiscally, and through greater private sector partnership for job/labour intensive sectors will be key for turning ambitious plans into substantial outcomes and nurturing a workforce capable of meeting the demands of a modern economy. Sitharaman’s record seventh Budget was more about coming to terms with the compulsion of coalition politics and calming frayed sentiments over jobs than about big ideas or bold reforms on the issue of jobless growth.