Special Employment Zones to create 5 crore new jobs in heartlands – Opinion News

From TV Mohandas Pai and Nisha Holla

Over the past decade, the NDA government has tackled two important challenges in India. First, it has overseen the largest development boom in Independent India by providing essential amenities such as housing, water and power. Second, it has built extensive infrastructure to connect the entire country. India now has a large aspiring class, especially the laborers who come from the soil; Creating high-quality jobs is another important socio-political challenge, especially in the heartlands.

India is the fastest growing major economy. Nominal GDP expanded from ₹113.5 trillion in FY14 to ₹295.4 trillion in FY24, achieving a robust CAGR of 10% and a ten-year cumulative growth of 160%. This economic growth has been accompanied by a steady increase in formal employment, as evidenced by extensive data from the Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI) systems. These databases are reliable as they register new Aadhar-linked subscribers only after actual payments to the fund are received.

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Encouraging employment generation in India

After a decline in subscribers during the pandemic years of FY20 and FY21, EPF and ESI subscriptions have increased. EPF saw 1.22 crore new subscribers in FY22, 1.38 crore in FY23 and estimates for FY24 suggest 1.31 crore new subscribers. From September 2017 to April 2024, EPF recorded a significant total of 7.85 crore new jobs. Similarly, ESI registered 1.49 crore new subscribers in FY22, 1.67 crore in FY23 and 1.67 crore in FY24. From September 2017 to April 2024, the ESI documented a total of 8.3 crore new jobs. However, there is significant overlap of subscribers between the two databases.

Despite some media claims of rising unemployment, EPF and ESI data – which are based on actual contributions and not surveys –show an encouraging trend in employment generation. Claims that these figures simply reflect the formalization of work are not supported by two key facts. First, these databases also track data from companies making their first shipments within a fiscal year, indicating that existing employees have been formalized. For example, in FY24, 56,023 establishments submitted their first check to EPF, formalizing 11.2 lakh jobs. This suggests that 1.19 crore (1.31 crore – 11.2 lakh) new jobs were created in FY24, excluding formalization.

Second, a significant number of new jobs are in the 18-25 age group, representing over 50% of new jobs each year in the EPF database and over 48% in the ESI. It is unlikely that such a high percentage of new individuals would be counted if these were simply existing jobs being formalized. This points to real job creation.

While employment growth is reasonable, strategic investments and incentives are needed to ensure adequate employment for India’s aspiring population. The labor force dependent on agriculture has moved to services and industry at a rate of 1% py since 2000 – excluding the pandemic years – and this trend is accelerating. They need robust opportunities where they can be trained, skilled and find suitable local employment. Another related issue is the availability of jobs with adequate wages to meet aspirations. Today, most EPF and ESI jobs pay less than INR 20,000 per month.

The India Employment Report 2024 published by Quess-FICCI shows that the percentage of women engaged in agriculture has increased from 57% in 2017-18 to 64.3% in 2022-23. There has also been a large increase in the participation of women in self-employment, especially in rural areas (from 57.7% in 2017-18 to 71% in 2022-23), largely attributed to the growth of SHGs through the DAY-NRLM mission. Women’s labor force participation increased from 23.3% to 37% during the same period. Rural women across India clearly aspire to earn and support their families and seek employment close to their homes to increase labor force participation.

Special Employment Areas

Budget 2024-25 provides an opportunity to expand the availability of jobs, building on the tremendous progress achieved through social schemes and infrastructure development over the last ten years. Initiatives such as Atma Nirbhar Bharat, Manufacturing Linked Incentive Schemes, Make in India and Skill India along with export linked manufacturing schemes provide a strong foundation for a nationwide employment generation drive.

The creation of Special Employment Zones (SEZs) could be a visionary step to create five million new jobs in the heartland of India over five years. Zones have to provide a grant of ₹2,000 per newly registered employee in the first 12 months and ₹1,500 PM for the next 12 months, besides bearing employers’ cost of EPFO ​​and ESI contributions for the first 24 months. This will reduce training costs and reduce productivity in the initial stages.

A significant allocation in the 2024-2025 Budget, followed by continued investment, can realize this vision. This funding would support the development of industry clusters, stimulate employers to set up factories and promote complementary urbanization to make these clusters globally competitive. It is essential that these clusters are located in overworked regions. The scheme can identify 300 backward districts and 1000 tier 2/3/4 citiescreating nearby clusters and providing the necessary connectivity for the movement of labor and the rapid movement of goods.

The budget may also provide tax rebates to entities that register in these SEZs. Kaushal scheme can be integrated for skill and salary verification through EPF or ESI payments. Women, who may face travel or relocation challenges, can find suitable local employment, significantly increasing their labor force participation. The SEZ mission will promote large-scale job creation in the heart of India, enabling backward districts to outpace the state’s growth and become the country’s new growth engines.

About the Authors: TV Mohandas Pai is Chairman, 3one4 Capital and Nisha Holla is a Researcher, 3one4 Capital.

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