A yawning gap between private sector hiring and government’s employment targets

Apprenticeship and skill training, not mere internships, can solve part of the job crisis staring India. We require a generation of workforce with a particular usable skill set for the private sector to boost value addition. We have too many students in degree programmes that do not lead to marketable skills that can be useful for any business.

The Union Budget 2024-2025 proposes five 'employment-linked incentive' schemes for the private sector, aiming to create 4.1 crore jobs. The reality, however, is that most of these schemes are internship programmes, which even on paper look like exploratory experiences enhancing academic learning, rather than any long-term apprenticeship, which is on-the-job training, resulting in higher skills, better pay and long-term economic security. These piecemeal interventions may not benefit the private sector, including manufacturing and services.

Do the schemes proposed in the Budget pass the litmus test of sound policymaking, beneficial for both the private sector and our youth? Take, for instance, the scheme ‘for providing internship opportunities in 500 top companies to 1 crore youth in 5 years’. The Budget Speech reads that “an internship allowance of Rs 5,000 per month along with a one-time assistance of Rs 6,000 will be provided. Companies will be expected to bear the training cost and 10 per cent of the internship cost from their CSR funds”.

As of FY2023, India’s top BSE 500 companies employ about 67.4 lakh people. The Budget proposes 1 crore interns to be absorbed in these companies in five years. That implies that each company is supposed to hire 4,000 interns per year, which turns out that each company will have a total of 13,480 original employees and 4,000 interns on average. Assuming that before the volunteering for the scheme, the company had some interns as well, the total number of interns in the company would be about 25 per cent of its strength. This is a huge number of interns. Do the companies have the absorption capacity for such a large number, especially when recent data tells us that companies are now averse to taking up interns for odd jobs?

In 2024, according to a Deloitte report, while pre-placement offers saw an annual drop of 26 per cent. Complementing it, campus hiring budgets saw a 33 per cent drop in the past year. This means, the private sector prefers employees with a definite skill set and is not looking for interns or freshers.

India's seven largest employers, comprising TCS, Infosys, Wipro, HCL Tech, Coal India, State Bank of India, and HDFC Bank, in FY2024, collectively, increased their workforce by a modest 45,000, indicating a relatively slow hiring pace. It's unlikely that they would consider hiring interns when they are simultaneously laying off experienced employees. Why would the private sector use a centralised government portal, and engage with the State, to hire low-skilled interns? Additionally, the paperwork and compliance of the subsidy payments are also daunting to many.

There are three solutions to this problem. First, the long-term solution is to unleash the set of impending reforms in labour, agriculture, finance, manufacturing and green sectors, and restructure State power to foster an environment that encourages private investment in India, unlocking boundless growth opportunities.

Second, implement innovative apprenticeship programmes. To encourage more youth in skill and vocational training, conditional cash transfers in the form of redeemable vouchers are an idea. The government can reimburse anybody who develops a certain skill certified by a relevant assessment agency. This has been rather successfully implemented in Kenya. It is transparent, stops leakages, and encourages meritocracy. It is important to underline that even though 78 per cent of India’s 15,000 ITI’s are owned and managed by the private sector, their seat utilisation rate is just 43 per cent, lower than the government’s 57 per cent.

The third option is for the State to consider, given it is ready to dole out a combined expenditure of Rs 2 lakh-crore for interns and freshers. The current outlay for employee compensation is 12 per cent of the total spending and there are about 49.18 lakh Union government employees, which means that the government spends approximately 11 lakh per annum on each employee. For a government that has been unable to create a conducive environment to increase private investment, and thereby value-added employment, it can easily fill about 18 lakh permanent government jobs with the proposed outlay of Rs 2 lakh-crore.

It is important to note that there are 10 lakh vacancies in the Union government. So, by spending Rs 2 lakh-crore, in five years, 18 lakh government jobs can be created, which includes reserved categories like the SCs, STs, OBCs, and EWS. Where there is a will, there is a way.

(Rachit Seth is the founder of ‘Policy Briefcase’. The views expressed are personal. He tweets at @rachitseth.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.