Finance Minister Sitharaman has presented a record budget of over Rs 48 lakh crore for the current financial year with a strong focus on skilling and employment of youth through several schemes and sops as the government aims to address the resentment among the youth that make up for the one third of the country’s population (15-35 year age group). The resentment of youth with the government’s economic policies, particularly due to lack of job creation, is believed to be one of the reasons behind electoral setbacks suffered by the ruling party in the recently concluded 2024 Lok Sabha elections this year in which the ruling BJP failed to win a simple majority on its own.
As per some estimates, nearly two-third of the country’s population is under the age of 35 years and generating employment in the 16-35 year age-group, which accounts for more than one-third of the country's population, now appears to be a top priority for the government.
In order to achieve this goal, FM Sitharaman has announced a series of measures in this year’s full budget. Though the focus of the first full year budget of the third term of Prime Minister Narendra Modi remains on the four priority groups – poor, women, youth and farmers – as was the case in the interim budget, this time a large number of schemes are focused on skilling and employment generation for youth.
FM Sitharaman said the particular focus of the budget was on employment, skilling, MSMEs, and the middle class.
“I am happy to announce the Prime Minister’s package of 5 schemes and initiatives 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 crore,” said the FM.
The government has made a provision of Rs 1.48 lakh crore for education, employment and skilling in this budget.
Three schemes for employment linked incentives
Under the first scheme, for all new employees in formal sector jobs, the scheme will provide one month wages in three installments with maximum benefit of upto Rs 15,000. The scheme is expected to benefit 2.1 crore youth.
In order to create more jobs in the formal manufacturing sector, the government will give incentive to both employers and employees for EPF contribution in specified scales for the first four years. The scheme, applicable to first time registrants to the EPF scheme is expected to benefit 30 lakh youth.
In order to create more formal jobs, the government will reimburse the EPF contributions of employers up to Rs 3,000/- per month for 2 years for all new hires. It is expected to create 50 lakh jobs.
Under the third scheme, the Centre in partnership with states and industry would upgrade 1,000 ITIs on hub and spoke model to provide one-to-two years courses for skilling of youth, benefitting 20 lakh youth.
However, the main attraction is the paid internship scheme as it aims to provide internships to 20 lakh youth in top companies every year for the next five years. The scheme is applicable to youth in the 21-24 year age group who are not in full time education or in full time employment. These youth will be paid a monthly allowance of Rs 5,000 per month.
Income Tax Relief to Middle Class
In addition to wooing the farmers and youth, FM Sitharaman gave relief to the middle class taxpayers as well. She further rationalized tax slabs under the new tax regime and increased the standard deduction for salaried class taxpayers from Rs 50,000 to Rs 75,000 in a year. She said that these measures will benefit a taxpayer up to Rs 17,500 in a year.
Sitharaman also announced a comprehensive review of Income Tax law to make it simple and easy to understand which will cut down on litigation as well. She said the exercise will be completed in six months.
Abolition of angel tax on startups
In order to attract investment into Indian startups, the FM also announced abolition of tax under Section 56(2)(viib) of the Income Tax Act of 1961 for all classes of investors. This tax, popularly referred as angel tax, was introduced in 2012 and has been highly contentious and unpopular since then, blamed for stunting the growth of startup culture in the country.
Pacifying alliance partners
FM Sitharaman also made a departure from the interim budget as she announced a big infrastructure push in the eastern part of the country under the newly announced Purvodaya scheme for the all-round development of the eastern region of the country covering Bihar, Jharkhand, West Bengal, Odisha and Andhra Pradesh.
The scheme will cover human resource development, infrastructure, and generation of economic opportunities to make the region an engine to attain a developed India, said the FM.
The scheme also covers two states ruled by crucial alliance partners – Bihar ruled by the JD(U), and Andhra Pradesh ruled by the Telugu Desam Party. These alliance partners have been pressing for a special package for their states in the budget.
The government has maintained the overall budgetary capital expenditure at Rs 11.11 lakh crore, at the same level as in the interim budget.
