BAJAJ BROKING
January 28, 2025
5 mins read
The upcoming Budget 2025 has provided the Government an opportunity to address some of the most challenging issues faced by the labour market, such as unemployment, insufficient skilling, absence of social security for workers in the informal economy, etc. Union Finance Minister Ms. Nirmala Sitharaman announced several initiatives in her past budgets to address labour issues. It is expected that Budget 2025 will also have policy measures meant to address unemployment and inadequate skilling. Most importantly, Budget 2025 could announce the gradual implementation of labour codes in India, which are aimed at reforming the labour market by easing rigidities and helping workers claim their rights.
India is one of the fastest growing economies in the world, but it faces many issues when it comes to its labour market. Whether unemployment, inadequate skills, lack of social security, or complex labour laws, India faces significant challenges in its labour market, including unemployment, inadequate skills, and lack of social security. And yet, labour is one of the most important resources that need to be developed if India wants to become “Viskit” and “Aatmnirbhar.”
In her previous budgets, Union Finance Minister Ms. Niramala Sitharaman announced several initiatives to address labour-related issues. For example, in Budget 2024, Ms. Sitharaman announced a package for job creation and skilling for vast numbers of youth. Continuing on those lines, industry stakeholders expect the Government to work towards skilling people and incentivising job creation in the private sector through Budget 2025.
There are certain budget expectations that the healthcare stakeholders have from the budget 2025. This includes a higher budget allocation for the entirety of the sector along with a reduction in GST. Here is a look at all the expectations the sector holds when it comes to the Union Budget 2025.
Why is the Labour Market a Key Focus Area?
It is well known that labour is an important factor of production and without adequately skilled people, no country can become a developed economy. In the last 2-3 decades, while the Indian economy has grown significantly, it still faces many issues related to its labour market, chiefly unemployment, lack of quality jobs, mis-match between education and skills needed at the workplace, the difference between the labour participation rate of men and women, etc. If India wants to become a developed economy, significant improvements are required in its labour market. The upcoming Budget 2025 is a great opportunity for Ms. Sitharaman to address the most important challenges concerning labour in the country.
Role of Union Budget in Shaping Labour Market
“Job creation” and “labour market reforms” have been key focus areas of budgets in the past. For example, in Budget 2024, Ms. Sitharaman announced a huge package amounting to ₹ 2 lakh crore to promote job creation in India, provide education loans for higher education, and skill two million youth. In Budget 2021, Ms. Sitharaman announced that social security benefits would be provided to gig and platform workers. She also said that minimum wages would be applicable to all kinds of workers; besides, they would have the coverage of the Employees State Insurance Corporation (ESIC). This clearly shows that the Union Government uses the budget as an opportunity to address the issues faced by all kinds of workers in the country. Hence, the expectations of the labour market from Budget 2025 are also high.
Expected Budget Allocations
Based on previous budgets, Union Budget 2025 could announce programs for vocational training and skill development aimed at making workers more employable. To bridge the gap between male and female labour participation rates, Budget 2025 may announce provisions to promote a women-focused workforce and childcare facilities at the workplace. The Government can also think of partnering with the private sector for workforce training through the public-private-partnership (PPP) route.
Policy Updates Likely to Impact Labour Market
The upcoming Budget 2025 is expected to address a number of issues faced by the labour market. For example, as per a Times of India report, Budget 2025 is likely to announce the gradual implementation of labour codes in the country. In the first year of rollout of the codes, large firms with more than 500 employees are expected to compulsorily comply with them. Then, mid-sized enterprises with 100-500 employees in the second year and firms with up to 100 employees in the third year of rollout will be expected to comply with the codes.
These codes will reform the labour market by easing rigidities and helping workers claim their rights. In 2019-20, 29 labour related acts were consolidated into four labour codes by prioritising skill development and dispute resolution. As per a Financial Express report, industry leaders expect the new labour codes to modernize labour laws and be beneficial for both companies and workers (like: modernized codes aim to streamline compliance for businesses while enhancing workers' rights, such as minimum wage and social security provisions) .
Previous budgets have tried to introduce reforms in the labour market. For example, Union Budget 2024 introduced the Employment Linked Incentives (ELI) scheme, which is aimed at creating 2 crore jobs. This scheme is meant to give a boost to job creation in the private sector and the skill development of people. Earlier, Budget 2022 announced that the Digital Ecosystem for Skilling and Livelihood (DESH) Stack e-portal would be launched, which was meant to help people acquire skills to find jobs relevant to them. Time and again, the Government announced schemes through previous budgets to make it easier for people to get skilled and find appropriate jobs. It is likely that Budget 2025 will take inspiration from some initiatives announced in the past to tackle labour market problems in an effective manner.
Existing Issues in the Labour Market
Many issues are plaguing the labour market in India; the most important of them pertains to joblessness. Currently, there is a lack of high-quality employment for several jobseekers in the country. As of now, India is a young country, but if high-quality jobs are not created, it may not be able to capitalize on its demographic dividend.
Moreover, there is a mismatch between education and skills needed at work. As a result, a significant number of jobseekers are not employable because they do not have the right skills. An Economic Times report mentioned that only half of India’s youth with formal education has skills for employment, highlights a significant skills gap in the workforce.
Besides, millions of people employed in the informal sector have little or no rights, which makes them extremely vulnerable.
Industry Expectations to Overcome Hurdles
Stakeholders expect Budget 2025 to focus on employment and skilling, based on a Business Standard report. Even in the previous budget in 2024, Ms. Sitharaman announced the “Employment Linked Incentive Scheme” and the “Prime Minister Internship Scheme” to boost job creation. While the internship scheme has started as a pilot project, the employment scheme has not yet been launched.
The report further said that industry leaders want Budget 2025 to provide a clear roadmap for the future of these schemes. To improve the skilling of the workforce, stakeholders have recommended that the Government should set up more universities in integrated townships for micro, small, and medium enterprises (MSMEs). The government should focus on skill development and set up new industrial training institutes or revamp the existing ones, as per a news report published in the Economic Times. The report further said that the government should accelerate work on infrastructure projects in the country, which will provide employment to semi-skilled and low-skilled workers.
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Industry leaders expect Budget 2025 to concentrate on skill development so that a rightly skilled workforce can be created. Gradual implementation of labour codes is also likely to be announced in the budget.
Budget 2025 can announce policy initiatives to address some of the most difficult challenges faced by the labour market in India, such as unemployment, inadequate skill development, lack of high-quality jobs, and lack of social security for workers in the informal sector.
Budget 2024 announced the launch of two extremely important schemes for job creation – the “Employment Linked Incentive Scheme” and the “Prime Minister Internship Scheme.” It is expected that the Government will continue focusing on these two schemes through Budget 2025 as well.
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