The Union Cabinet, led by Prime Minister Shri Narendra Modi, has approved the Employment Linked Incentive (ELI) Scheme with a budget of ₹99,446 crore. The goal is to promote large-scale formal employment in various sectors, especially manufacturing. This initiative aims to create more than 3.5 crore formal jobs over two years, focusing on youth and first-time employees. The scheme covers jobs created between August 1, 2025, and July 31, 2027. It is part of the broader employment and skill development package announced in the Union Budget 2024-25, which has a total budget of ₹2 lakh crore to benefit 4.1 crore young Indians.

The ELI Scheme has two parts. Part A targets first-time employees, who can receive a wage incentive of up to one month’s EPF wages, capped at ₹15,000. The incentive will be paid in two instalments. The first instalment comes after six months of continuous service, and the second is paid after completing one year of service, along with a financial literacy program. Employees with salaries of up to ₹1 lakh per month are eligible for this benefit. To encourage saving, part of the incentive will go into a fixed savings account, which employees can access later. It is estimated that 1.92 crore individuals will benefit from this component, helping to improve financial inclusion and formalize the workforce.

Part B of the scheme focuses on providing incentives to employers who create additional sustained employment. Establishments registered with EPFO will receive monthly incentives depending on the employee’s salary range. This benefit applies to employees earning up to ₹1 lakh per month, with a condition that they must be employed for at least six months.

Details of the incentive structure are as follows:

*Employees with EPF wages up to ₹10,000 will get a proportional incentive.

These payments will continue for two years, and for manufacturing establishments, they will extend for four years. To qualify, employers must hire at least two additional employees if their workforce is below 50, or five if they have 50 or more. All payments will be credited directly into PAN-linked bank accounts. This component is expected to create an additional 2.60 crore jobs.

Payments under the ELI Scheme will be made through Direct Benefit Transfer (DBT). First-time employees will get payments through the Aadhaar Bridge Payment System (ABPS), while employers will receive their incentives directly into their PAN-linked bank accounts. The scheme aims to increase job creation in all sectors, especially manufacturing, and promote formal workforce participation by extending social security coverage to many young people entering the job market.

Prime Minister Narendra Modi hailed the initiative as a transformative step towards boosting job creation and empowering youth. “The focus on manufacturing and incentives for first-time employees will greatly benefit our young workforce,” he said. Union Minister for Labour and Employment Mansukh Mandaviya added that the scheme aims to create employment opportunities for 3.5 crore youth as part of a larger employment package announced in the Union Budget 2024–25. The ELI scheme is one of five initiatives under a comprehensive employment and skilling programme with a cumulative allocation of ₹2 lakh crore, targeting 4.1 crore youth.

However, the scheme has drawn criticism from some quarters. Despite differing perspectives, the ELI scheme marks a major policy intervention aimed at catalysing employment growth, particularly among first-time job seekers, and reinforcing India’s long-term economic and industrial development goals.