CII’s 7-Point Agenda for Employment Generation

1. In January 2025, the Confederation of Indian Industry (CII) has proposed a 7-point agenda to address the pressing issue of unemployment in India ahead of the upcoming Union Budget 2025-26.

2. With India’s large and youthful population, effective strategies are essential to create jobs, leverage the demographic dividend, and promote inclusive growth.

What is Meant by Unemployment?

1. Unemployment refers to a situation where individuals who are willing and able to work at prevailing wage rates cannot find suitable employment.

2. The Periodic Labour Force Survey (PLFS), conducted by the Ministry of Statistics and Programme Implementation (MoSPI), defines unemployment based on three key criteria:

1. Activity Status: Individuals are considered unemployed if they are not engaged in any economic activity during the reference period.

2. Job Search: They should have been actively seeking work.

3. Willingness to Work: They should be willing to accept employment if offered.

Types of Unemployment

Type	Description
Structural Unemployment	Arises when there is a mismatch between the skills of job seekers and the requirements of available jobs. Often occurs due to technological advancements or changes in industry demands.
Cyclical Unemployment	Caused by economic downturns or recessions when businesses reduce hiring. Employment levels typically improve during periods of economic growth.
Seasonal Unemployment	Common in industries like agriculture, tourism, and construction where demand for labour fluctuates seasonally. Workers remain unemployed during off-peak seasons.
Disguised Unemployment	Occurs when more people are employed than needed, leading to low productivity. Frequently seen in the agricultural sector in India.
Frictional Unemployment	Temporary unemployment faced by individuals transitioning between jobs or entering the workforce. Usually short-term and resolved once suitable employment is found.
Technological Unemployment	Results from the replacement of human labour with automation or advanced machinery. Can lead to skill redundancy without adequate retraining programs.
Underemployment	Occurs when individuals are employed in jobs that do not fully utilize their skills or provide adequate income. Includes part-time workers seeking full-time employment.

Unemployment in India

1. Official Data Source: The Periodic Labour Force Survey (PLFS) is the primary source for employment and unemployment indicators since 2017-18.

2. Youth Unemployment: The unemployment rate among youth (aged 15-29) was estimated at 10.2% in 2023-24.

3. Disguised Unemployment: The agriculture sector engages 45% of the labour force but contributes only 16% of the Gross Value Added (GVA), highlighting disguised unemployment.

4. Gig Economy Challenges: The rise of the unorganized and gig sectors has introduced issues like job insecurity and lack of social benefits.

1. The gig economy refers to a labor market characterized by short-term, and flexible jobs often facilitated through digital platforms.

2. It involves individuals or companies offering services on a temporary or task-by-task basis, rather than through traditional full-time employment contracts.

About Confederation of Indian Industry (CII) Overview: The Confederation of Indian Industry (CII) is a non-government, not-for-profit organization led and managed by industry stakeholders. Mission: CII strives to create and maintain an environment conducive to India’s development by collaborating with industry, government, and civil society. It achieves this through advisory and consultative processes. Established: Founded in 1895, CII has been working for over a century to support India's industrial and economic growth. Headquarters: The organization is based in New Delhi.

CII’s 7-Point Agenda for Employment Generation

CII’s recommendations focus on creating a structured approach to tackle unemployment:

1. Integrated National Employment Policy: Develop a unified employment policy consolidating various schemes across ministries and states.

1. Enhance the existing National Career Service (NCS) portal to integrate data from state and ministry-level employment initiatives.

2. Data-Driven Employment Insights: Establish a Universal Labour Information Management System (ULIMS) under National Career Service to provide: employment projections, skill demand insights, job classifications and aligned training opportunities.

3. Boosting Labour-Intensive Sectors: Focus on sectors like construction, tourism, textiles, and low-skilled manufacturing.

1. Align tariff structures, Free Trade Agreements (FTAs), and Production/Employment Linked Schemes to support these sectors.

2. Encourage exports from labour-intensive manufacturing industries to create more jobs.

4. Empowering Rural Youth: Launch an internship program in government offices for college-educated youth in rural areas.

1. Address the gap between education and professional skills while enhancing manpower for rural initiatives.

5. Increasing Female Workforce Participation: Build dormitories using Corporate Social Responsibility (CSR) funds.

1. Formalize the care economy and establish government-supported creches in industrial clusters.

2. Implement gender-sensitive frameworks for skill development and employment policies.

3. Strengthen women’s safety laws and a promote supportive work environments.

6. Incentives for Hiring: Replace Section 80JJAA of tax provisions with a new provision under Chapter VIA.

1. Allow enhanced deductions for new employees under both standard and concessional tax regimes.

2. Limit eligibility to employees hired outside reorganizations or reconstructions.

3. Grant deductions for up to three years of employment, with a salary cap of Rs. 1 lakh per month.

Current Provision: Section 80JJAA: This section allows employers to claim deductions for hiring new employees. The deduction is 30% of the additional employee cost incurred in the previous year. Eligibility is limited to companies subject to tax audit, and the new employees must be employed for at least 240 days in a year (150 days in some cases, like the apparel industry). The provision is aimed at encouraging the formalization of employment and boosting job creation. Proposed Changes by CII: Introduce a new provision under Chapter VIA, which would apply even if the taxpayer opts for the concessional tax regime. Rationale for the Change: Broaden the scope of hiring incentives to include a wider range of employers. Provide greater flexibility to taxpayers under the concessional tax regime. Ensure the provision is aligned with modern employment trends and focuses on genuine job creation.

7. Tapping the Global Job Market: Establish an International Mobility Authority under the Ministry of External Affairs.

1. Facilitate global employment opportunities for Indian youth through collaborations like the US H1B visa program and agreements with countries such as Australia.

2. Align skill development programs with global requirements, including cultural training and foreign language skills.

Challenges in India’s Employment Landscape

1. Skill Gap: Only 5% of Indian labour has formal training compared to 95% in South Korea.

2. Employer Hesitation: Stringent labour norms and compliance burdens discourage new hiring.

3. Fragmented Job Market: Lack of coordination between various sectors complicates targeted hiring.

4. Automation: The rise of AI and machine learning reduces the demand for human labour in several sectors.

CII’s Additional Recommendations

1. Labour Codes Implementation: Extend social security to gig and platform workers.

2. Improving Productivity: Reduce the Incremental Capital Output Ratio (ICOR) from 4.1 through better productivity metrics.

1. Incremental Capital Output Ratio (ICOR) is an economic metric that measures the efficiency with which capital is used to generate economic output.

2. It is defined as the ratio of additional capital investment required to produce an additional unit of output (GDP).

3. A lower ICOR indicates better efficiency, meaning less capital is needed to achieve economic growth, while a higher ICOR suggests inefficiency.

3. Expert Committee: Set up a panel to study and recommend measures to enhance employment generation and productivity.

Conclusion

Unemployment in India remains a critical challenge requiring structural reforms and focused policies. CII’s seven-point agenda provides a comprehensive roadmap to harness India’s demographic dividend, enhance productivity, and drive inclusive growth. With the Union Budget 2025-26 as an opportunity, targeted initiatives, skill development programs, and a sectoral focus can pave the way for a sustainable and robust employment ecosystem.

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