Government Clears ELI Scheme to Encourage Employment Generation

Introduction

In a major policy initiative aimed at tackling unemployment and promoting economic growth, the Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the Employment Linked Incentive (ELI) Scheme with a budget outlay of ₹99,446 crore. This transformative scheme seeks to incentivize job creation, enhance employability, and extend social security benefits to millions of Indians, especially in the manufacturing sector.

A Game-Changer for Employment Generation

The ELI scheme aims to generate over 3.5 crore jobs in a span of two years, from August 1, 2025, to July 31, 2027. Out of these, nearly 1.92 crore beneficiaries are expected to be first-time entrants into the workforce. By offering direct benefits to both employers and employees, the scheme promises to create a ripple effect across the economy, particularly in formalizing the informal workforce and ensuring broader social security coverage.

Background and Vision

The ELI scheme was first announced in the Union Budget 2024–25, as a part of the Prime Minister’s broader employment package comprising five flagship initiatives aimed at skilling, entrepreneurship, and livelihood enhancement for more than 4.1 crore youth, with a total budget outlay of ₹2 lakh crore.

Union Information and Broadcasting Minister Ashwini Vaishnaw, in a press briefing held in New Delhi, elaborated that the ELI scheme is not only an employment initiative but also a step toward bringing more workers into the formal sector by linking them with social security mechanisms like EPFO.

Scheme Components: Part A and Part B

The ELI scheme has been designed with two primary components — one focusing on first-time employees (Part A), and the other on incentivizing employers for creating additional employment (Part B).

Part A: Incentive for First-Time Employees

Targeting individuals joining the workforce for the first time and registered with the Employees’ Provident Fund Organisation (EPFO), Part A offers a one-time wage incentive up to ₹15,000 disbursed in two installments:

• First installment after six months of continuous employment
• Second installment after 12 months, provided the employee completes a financial literacy program

To encourage long-term financial planning, a portion of the incentive will be kept in a fixed deposit or savings instrument, accessible at a later date. The benefit is applicable to employees earning up to ₹1 lakh per month, though the incentive itself is capped at ₹15,000. This component is expected to benefit around 1.92 crore new entrants.

Part B: Incentive for Employers

Part B focuses on incentivizing employers across all sectors, with a special emphasis on manufacturing, for generating additional employment. Employers registered with EPFO will be eligible for incentives for hiring:

• At least two additional employees (for establishments with fewer than 50 employees)
• At least five additional employees (for establishments with 50 or more employees)

These additional employees must be retained for a minimum of six months to qualify for the benefit. The incentive structure is based on wage slabs:

For the manufacturing sector, these benefits will be extended to the third and fourth years as well, thus encouraging long-term employment.

Direct Benefit Transfer Mechanism

All payments under the scheme will be made using Direct Benefit Transfer (DBT). For employees, funds will be transferred via Aadhaar Bridge Payment System (ABPS) into Aadhaar-linked accounts. Employers will receive payments directly into PAN-linked bank accounts.

This mechanism ensures transparency, reduces leakage, and improves targeted delivery of government support.

Key Outcomes Expected

The ELI Scheme is expected to achieve multiple goals:

1. Formalization of Workforce: Bringing millions of informal workers into the formal economy with social security coverage.
2. Youth Empowerment: Supporting first-time job seekers with financial incentives and financial literacy.
3. Sectoral Development: Focused growth in the manufacturing sector, which has a high employment multiplier.
4. Economic Stimulus: Boosting consumption and savings by increasing disposable incomes through wage incentives.

Supporting Innovation and Infrastructure

In addition to the ELI Scheme, the Cabinet also approved the Research Development and Innovation Scheme with a corpus of ₹1 lakh crore to strengthen the country’s R&D ecosystem. This initiative, guided by the Anusandhan National Research Foundation under the Prime Minister’s leadership, seeks to overcome funding constraints in the private sector and encourage innovation in sunrise and strategic sectors.

Further, the Cabinet also cleared the National Sports Policy 2025, with the ambitious goal of positioning India among the top five sporting nations globally. The policy emphasizes grassroots sports development, infrastructure creation, and promoting sports tourism.

A significant infrastructure project, the four-lane Paramakudi–Ramanathapuram road in Tamil Nadu, was also approved, with an estimated cost of ₹1,853 crore. This 46.7-kilometer stretch will enhance connectivity to major religious and economic hubs like Rameshwaram and Dhanushkodi, boosting both tourism and local trade.

Conclusion

With the approval of the ELI scheme, the Union Government has taken a major step toward transformative employment generation, economic formalization, and inclusive development. By targeting both job seekers and employers and focusing on long-term retention and skilling, the scheme addresses core challenges of the Indian labor market. The emphasis on manufacturing, innovation, sports, and infrastructure indicates a comprehensive approach to nation-building in the years ahead.

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