Govt approves Rs 1 lakh crore scheme to support creation of 3.5 crore jobs in just 2 years

In a major policy move aimed at accelerating formal employment and expanding social security coverage, the Union Cabinet chaired by Prime Minister Narendra Modi has approved the Employment Linked Incentive (ELI) Scheme with a budgetary outlay of Rs 99,446 crore.

The program seeks to support the creation of over 3.5 crore jobs between August 2025 and July 2027, with a dual focus on first-time employees and hiring incentives for employers, particularly in the manufacturing sector.

The ELI Scheme, announced in the Union Budget 2024–25 as part of a Rs 2 lakh crore package targeting youth employment and skilling, is expected to be one of the largest such interventions in recent years. The plan comprises two distinct components—Part A focused on workers entering the formal economy for the first time, and Part B offering performance-based financial incentives to employers who generate sustained additional employment.

A wage boost for new entrants

Under Part A, approximately 1.92 crore first-time employees registered with the Employees' Provident Fund Organisation (EPFO) will be eligible for a one-time incentive equivalent to one month’s EPF wage, up to Rs 15,000.

The incentive will be distributed in two tranches—half after six months of continuous service and the remainder after a year, contingent on completion of a financial literacy course. Eligible beneficiaries must have a monthly salary not exceeding Rs 1 lakh. A portion of the benefit will be deposited into a locked savings instrument to encourage long-term financial discipline.

Manufacturing sector gets extended support

Part B of the scheme is directed at employers across all sectors, with a tailored thrust on manufacturing. Firms registered with EPFO will receive monthly incentives ranging from Rs 1,000 to Rs 3,000 per additional employee, depending on the EPF wage slab. The incentives will be provided for two years, with an extended benefit period of four years for manufacturing jobs.

Employers will qualify only if they sustain a net increase in employment—hiring at least two new workers for establishments with fewer than 50 employees, or five new workers for larger firms—for a minimum period of six months. Salaries of new hires must not exceed Rs 1 lakh per month.

The incentive breakdown per new hire is as follows:

1. Rs 1,000 for EPF wages up to Rs 10,000
2. Rs 2,000 for EPF wages above Rs 10,000 and up to Rs 20,000
3. Rs 3,000 for EPF wages exceeding Rs 20,000 and up to Rs 1,00,000

This employer-side component alone is projected to generate 2.6 crore new jobs over the scheme period.

Direct benefit transfers and formalisation push

Incentives to employees will be disbursed via the Aadhaar-linked Direct Benefit Transfer (DBT) system using the Aadhar Bridge Payment System (ABPS), while payments to employers will be credited directly to their PAN-linked bank accounts.

By incentivizing both demand and supply sides of job creation, the ELI Scheme aims to address multiple policy objectives: improving youth employability, fostering savings habits, reducing informal employment, and bolstering labor-intensive industries. Notably, it also builds on the government’s longer-term agenda to formalize India’s workforce and expand the footprint of social security entitlements.