Stimulus on a tight budget: Emphasis on job creation for the low-skilled

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November 13, 2020 8:00 AM

Of the Rs 50,000 crore allocated under PMGRKY, Rs 37,543 crore has already been spent, the FM said. Under PMGSY, Rs 19,500 crore was allocated in the Budget for 2020-21.

The fall in recent months of the person days generated under the rural employment guarantee scheme has been sharper than the decline in the demand for work.The fall in recent months of the person days generated under the rural employment guarantee scheme has been sharper than the decline in the demand for work.

Thursday’s stimulus package was marked by a thrust given to incentivising job creation. Finance minister Nirmala Sitharaman sought to earmark an additional Rs 16,000 crore to meet this objective – Rs 10,000 crore rural-oriented programmes, such as MG-NREGS and Rs 6,000 crore for subsidising mandatory contributions by firms and workers towards employees’ provident fund (EPF).

The rural employment guarantee scheme’s budgetary cost was threatening to far exceed the outlay even after it was hiked by 65% to Rs 1,01,500 crore. So far in the year, the government has spent Rs 73,500 crore to run the popular scheme to create 251 crore person days of work, close to the level in the whole of last year. The fall in recent months of the person days generated under the rural employment guarantee scheme has been sharper than the decline in the demand for work.

According to the CMIE, the employment rate that declined by a massive 12.2 percentage points in April, recovered sharply in May-July, but the rate of recovery has since been negligible. The employment rate in October at 37.8% was 1.56 percentage points lower than it was in 2019-20.

Under the PM Garib Kalyan Rozgar Yojana (PMGKRY), a scheme that dovetails various rural-centric schemes such MG-NREGS and launched in June mainly to provide livelihood opportunities to returnee migrant workers in 116 districts, the government will provide an additional Rs 10,000 crore this year. Apart from MG-NREGS, the money would be spent on Pradhan Mantri Gram Sadak Yojana (PMGSY). “This will accelerate the growth of the rural economy,” finance minister Nirmala Sitharaman said.

Of the Rs 50,000 crore allocated under PMGRKY, Rs 37,543 crore has already been spent, the FM said. Under PMGSY, Rs 19,500 crore was allocated in the Budget for 2020-21.

For encouraging creation of formal employment, the Centre will bear the entire 24% contribution of both the employers and the employees, towards EPF for new employees earning less than Rs 15,000 a month in establishments having less than 1,000 employees and bear the employees’ contribution of 12% in establishments with more than 1,000 employees.

The new scheme, Aatmanirbhar Bharat Rozgar Yojana, will remain operational till June next year and the subsidy under the scheme can be availed for two years. The estimated subsidy outgo under the scheme for the current fiscal would be around Rs 6,000 crore. Overall, the subsidy amount could go up to `36,000 crore. “This will encourage formal employment,” said former Central Provident Fund commissioner KK Jalan.

New employees would mean both those who will be entering into formal employment for the first time with freshly allotted Aadhaar-seeded universal account number (UAN) by the EPFO as well as those who would be rejoining into formal employment (already having been UAN allotted) after losing job during the pandemic period between March and September, 2020, within Rs 15,000 monthly salary threshold.

Employers will have to add at least two new employees in their establishments if they have a total workforce of 50 and five, in case they have the strength of more than 50 employees to be eligible to avail the offer. “Around 99.1% of the formal employment will be able to avail benefits under the scheme,” the FM said.

“The EPF subsidy given its low wage aspect (

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