Job creation is one of the key challenges before the government, which will present last full-fledged Budget on February 1 ahead of the 2019 Lok Sabha elections and several state elections scheduled this year.
Prime Minister Narendra Modi, in his campaign for the 2014 general elections, had promised to create 10 million jobs a year for the youth. However, with over three years into power, what has been witnessed is a marginal rise in the unemployment rate.
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The issue of job crisis has the potential to harm the electoral prospects of the Bharatiya Janata Party (BJP) in the crucial upcoming elections.
According to a quarterly survey of industries by the Labour Bureau of the labour ministry, the pace of job creation fell to a six-year low in 2015 with 135,000 new jobs being created compared with 421,000 in 2014 and 419,000 in 2013.
Another survey of households conducted by the Labour Bureau showed unemployment rate rising to a five-year high of 5% in FY16 compared with 4.9% in FY14 and 4.7% in FY13
Budget 2018 is an opportunity for the Modi government to address the issue which might hit the BJP’s electoral base.
There are high expectations that the government will make some major announcements regarding jobs.
Experts believe that a National Employment Policy (NEP) will be introduced in the Budget, which will outline a comprehensive road map for creation of quality jobs across sectors through economic, social and labour policy.
Since most of the jobs created in India are in the informal sector, the policy would seek to reverse this trend. About 90 per cent of workers are engaged in informal employment, not covered by any social security law and most likely not getting the minimum wage.
Experts believe that a special focus in the Budget will be on sectors like manufacturing and agriculture which are employment driven.
Tax rate cuts are expected for these sectors – an attempt by the government to increase employment in the formal sector.
To create more jobs in employment-intensive sectors like food processing, dairy farming and horticulture, the Budget could focus on synchronising the Narendra Modi government’s pet skill development programme with job creation.
Next, providing tax benefits for creation of additional jobs can also feature in the Budget. Like may other countries, India also has such provisions.
It’s likely that section 80JJAA of the Income Tax (I-T) Act may be tweaked to provide a greater impedus for job creation or some other new provisions introduced.
Section 80JJAA, which came into effect from fiscal 2016-17 and replaced an earlier version, 30 per cent of additional employee cost is available as a deduction for three years, including the year in which the new employment is generated.
The Economic Survey said that the government will push ahead with labour reforms, increase spending on infrastructure and create an enabling environment for labour-intensive sectors to boost job creation.
With job creation becoming a major political issue ahead of the 2019 Lok Sabha elections, the government said creation of employment opportunities for the youth is one its three areas of policy focus in the medium term, the other two being education and agriculture.