New Delhi : The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the Employment Linked Incentive (ELI) Scheme, a transformative initiative aimed at generating over 3.5 crore jobs across India by July 2027. Announced as part of the Union Budget 2024-25, the scheme, with a financial outlay of ₹99,446 crore, seeks to boost employment, enhance employability, and strengthen social security, with a special focus on the manufacturing sector. This comprehensive program is part of the Prime Minister’s package of five schemes designed to facilitate employment, skilling, and opportunities for 4.1 crore youth, backed by a total budget of ₹2 lakh crore.
Overview of the Employment Linked Incentive Scheme
The ELI Scheme, administered by the Ministry of Labour & Employment, is a two-year initiative running from August 1, 2025, to July 31, 2027. It targets the creation of approximately 3.5 crore jobs, including 1.92 crore for first-time employees entering the formal workforce. The scheme is structured in two parts: Part A, which focuses on first-time employees, and Part B, which incentivizes employers to generate additional employment.
Part A: Support for First-Time Employees
Under Part A, first-time employees registered with the Employees’ Provident Fund Organisation (EPFO) will receive a wage subsidy equivalent to one month’s EPF wage, capped at ₹15,000. This benefit is available to employees earning up to ₹1 lakh per month. The payment will be disbursed in two instalments:
- First instalment: Payable after six months of service.
- Second instalment: Payable after 12 months of service, contingent on the completion of a financial literacy programme.
To encourage saving habits, a portion of the incentive will be deposited into a savings instrument with a lock-in period, which employees can withdraw at a later date. All payments under Part A will be made through the Direct Benefit Transfer (DBT) mode using the Aadhaar Bridge Payment System (ABPS), ensuring transparency and efficiency.
Part B: Incentives for Employers
Part B of the ELI Scheme focuses on encouraging employers to create additional jobs, particularly in the manufacturing sector. Employers registered with the EPFO will receive incentives of up to ₹3,000 per month for each additional employee hired, for a period of two years. For the manufacturing sector, these benefits are extended to four years. The incentive structure is tiered based on the employee’s EPF wage:
- Up to ₹10,000 monthly wage: ₹1,000 per month.
- ₹10,001 to ₹20,000 monthly wage: ₹2,000 per month.
- ₹20,001 to ₹1 lakh monthly wage: ₹3,000 per month.
To qualify, employers must meet specific hiring thresholds:
- Establishments with fewer than 50 employees: Must hire at least two additional employees.
- Establishments with 50 or more employees: Must hire at least five additional employees.
These employees must be retained for a minimum of six months to ensure sustained employment. Payments to employers under Part B will be made directly into their PAN-linked accounts, streamlining the process and reducing administrative hurdles.
Objectives and Impact
The ELI Scheme is designed to address India’s pressing need for job creation, as highlighted in the Economic Survey 2024, which estimates that the country must generate 7.85 million non-farm jobs annually until 2030 to accommodate its expanding labour force. By incentivizing both employees and employers, the scheme aims to:
- Promote job creation: Generate approximately 2.6 crore additional jobs across all sectors, with a special emphasis on manufacturing.
- Enhance employability: Equip first-time employees with financial literacy and formal workforce integration.
- Expand social security: Formalize the workforce by extending social security coverage to millions of young men and women through EPFO registration.
- Boost manufacturing: Encourage growth in the manufacturing sector by offering extended incentives to employers.
Prime Minister Narendra Modi emphasized the scheme’s potential to transform the employment landscape, stating, “The focus on manufacturing and incentives for first-time employees will greatly benefit our youth.” Labour Minister Mansukh Mandaviya echoed this sentiment, noting that the scheme is designed to provide jobs for 3.5 crore youth while ensuring robust monitoring mechanisms to prevent misuse.
Robust Monitoring and Transparency
Learning from past experiences with schemes like the Aatmanirbhar Bharat Rozgar Yojana (ABRY), where issues of corruption and fake claims were reported, the government has implemented foolproof systems for the ELI Scheme. Labour Minister Mandaviya highlighted that AI-driven technologies will be used to monitor hiring and fund utilization, ensuring that only genuine new hires qualify for incentives. The Corporate Affairs Ministry has been tasked with compiling a list of participating firms, while the Labour Ministry has finalized the scheme’s operational framework.
Industry and Trade Union Reactions
The ELI Scheme has received mixed responses. Industry leaders have welcomed the initiative, with Anish Shah, immediate past president of the Federation of Indian Chambers of Commerce & Industry (FICCI), praising its focus on dignity, security, and formalization. Puneet Gupta, Tax Partner at Ernst & Young India, described the scheme as a “significant milestone” toward building a robust and inclusive workforce.
However, trade unions have expressed skepticism. Tapan Sen, General Secretary of the Centre of Indian Trade Unions (CITU), criticized the scheme as a “deceptive” mechanism to transfer public funds to employers, urging the working class to reject it.
Additional Cabinet Approvals
In addition to the ELI Scheme, the Union Cabinet approved several other initiatives on July 1, 2025, aimed at transforming India’s economic and sporting landscape:
Research Development and Innovation (RDI) Scheme
The Cabinet approved a ₹1-trillion RDI Scheme to spur private-sector investment in strategic and high-growth sectors such as deep-tech, AI, and green technologies. Originally announced in the July 2024 Budget, the scheme will provide long-term, low-cost financing to address gaps in private-sector research funding. The Anusandhan National Research Foundation (ANRF), chaired by Prime Minister Modi, will oversee the scheme, which includes a two-tiered funding mechanism:
- Special Purpose Fund (SPF): Acts as the custodian of funds within the ANRF.
- Second-level fund managers: Allocate funds primarily as long-term concessional loans.
The RDI Scheme aims to finance transformative projects at higher Technology Readiness Levels (TRL) and acquire technologies of strategic importance. India’s gross expenditure on R&D has doubled from ₹60,196 crore in 2010-11 to ₹1,27,380 crore in 2020-21, though its share of total economic output has declined from 0.83% to 0.64% over the same period.
National Sports Policy 2025
The Cabinet also approved the National Sports Policy (NSP) 2025, aimed at elevating India to the top five sporting nations globally. The policy, which supersedes the NSP of 2001, focuses on:
- Strengthening sports programs from grassroots to elite levels.
- Early identification and nurturing of talent.
- Promoting competitive leagues and sports infrastructure in rural and urban areas.
- Building world-class systems for training, coaching, and holistic athlete support.
- Encouraging sports tourism and attracting major international events.
Union Minister Ashwini Vaishnaw emphasized that the policy will establish a regulatory framework for sports governance and finance the sector through public-private partnerships and corporate social responsibility funds. It will also serve as a model for states to align their sports policies with national objectives.
Infrastructure Development
The Cabinet Committee on Economic Affairs (CCEA) approved the construction of a 46.7-kilometer four-lane Paramakudi-Ramanathapuram highway in Tamil Nadu, with a capital cost of ₹1,853 crore. The project, to be executed in Hybrid Annuity Mode (HAM), will enhance connectivity between major religious and economic centers, boosting tourism to Rameshwaram and Dhanushkodi.
Budget Context and Economic Imperative
The ELI Scheme was first announced by Finance Minister Nirmala Sitharaman in the Union Budget 2024-25 as part of a broader package to address India’s employment challenges. The Economic Survey 2024 underscored the urgency of creating 7.85 million non-farm jobs annually, far exceeding current employment rates. The scheme’s focus on formalizing the workforce and incentivizing manufacturing aligns with India’s broader economic goals of self-reliance and global competitiveness.
Implementation Timeline and Scope
The ELI Scheme will apply to jobs created between August 1, 2025, and July 31, 2027. It is expected to benefit approximately 4 crore job-seekers in the long term, with 1.92 crore first-time employees directly supported. By integrating financial literacy and social security measures, the scheme aims to create a sustainable and inclusive employment ecosystem.
Conclusion
The Employment Linked Incentive Scheme, approved on July 1, 2025, represents a bold step toward addressing India’s employment challenges while fostering economic growth and social security. With a ₹99,446 crore outlay, the scheme is poised to create 3.5 crore jobs, formalize the workforce, and bolster the manufacturing sector. Coupled with the RDI Scheme and National Sports Policy 2025, these initiatives reflect the government’s commitment to building a skilled, innovative, and competitive India. As the nation gears up for implementation, all eyes will be on the ELI Scheme’s ability to deliver on its ambitious promises.
Frequently Asked Questions (FAQs)
1. What is the Employment Linked Incentive (ELI) Scheme?
The ELI Scheme, approved by the Union Cabinet on July 1, 2025, is a ₹99,446 crore initiative under the Ministry of Labour & Employment to create over 3.5 crore jobs by July 2027. Announced in the Union Budget 2024-25, it aims to boost employment, enhance employability, and strengthen social security, with a focus on the manufacturing sector.
2. Who is eligible for the ELI Scheme benefits?
Employees: First-time workers registered with the Employees’ Provident Fund Organisation (EPFO) earning up to ₹1 lakh per month are eligible for a one-month wage subsidy (up to ₹15,000) in two instalments.
Employers: EPFO-registered establishments hiring at least two additional employees (for firms with fewer than 50 employees) or five additional employees (for firms with 50 or more employees) for at least six months qualify for incentives of up to ₹3,000 per month per new hire.
3. How does the ELI Scheme support first-time employees and employers?
Part A (Employees): First-time employees receive up to ₹15,000 in two instalments (after 6 and 12 months of service, with the second requiring completion of a financial literacy program). Payments are made via Direct Benefit Transfer (DBT).
Part B (Employers): Employers receive incentives of ₹1,000–₹3,000 per month per additional employee for two years, extended to four years for manufacturing sector hires. Payments are made to PAN-linked accounts.
4. What is the duration and scope of the ELI Scheme?
The scheme applies to jobs created between August 1, 2025, and July 31, 2027. It targets 3.5 crore jobs, including 1.92 crore for first-time employees, and aims to formalize the workforce while supporting sectors like manufacturing to align with India’s economic goals.
5. How will the government ensure transparency in the ELI Scheme?
The government will use AI-driven technologies and foolproof systems to monitor hiring and fund utilization, preventing misuse. The Corporate Affairs Ministry will compile a list of participating firms, and the Labour Ministry has finalized the operational framework to ensure transparency and accountability.
