India’s budget needs to address three medium-to-long term priorities

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Subscribe to enjoy similar stories. As we approach the new year, preparation of the annual budget is proceeding in earnest. Apart from the annual balancing of expenditure, revenues and the deficit, the next budget will hopefully address some medium-to-long term priorities, as there is no other policy document that can address these concerns in the post-Five Year Plan era.

These priorities have been discussed in several of my earlier columns. Here, I briefly summarize the three most important. First, we need to make growth more employment intensive.

Surveys indicate that the number of openly unemployed has grown from about 10 million persons in 2011-12 to about 20 million today. In addition, there are under-employed workers, though their robust quantification is difficult. How can growth be made more labour intensive? In a welcome move, the 2024-25 budget introduced several employment-linked incentive (ELI) schemes and an apprenticeship programme, altogether amounting to an allocation of nearly ₹12,000 crore.

Assuming the private sector responds positively to these schemes, they would help draw in relatively well-educated unemployed individuals into formal-sector employment. However, it would have little impact on the informal sector, which accounts for 90% of the workforce. For them, we need a different ELI that makes employment-intensive sectors of economic activity relatively more profitable.

An NCAER study identified some 20 labour-intensive sectors where every ₹1 crore of output generates 20 additional jobs. Of these, about 10 sectors are already large employers of millions of workers: like construction, transport, trade, hotels and tourism, textiles and garments, food processing, etc. An ELI scheme linking incentive