India’s ₹99446 crores Jobs Bet: Will ELI Actually Work?

The Employment Linked Incentive scheme could transform how India creates formal employment. But turning ₹99,446 crore into 3.5 crore sustainable jobs requires more than good intentions.

India just launched the world’s largest employment incentive program — the Employment Linked Incentive (ELI) scheme. With ₹99,446 crore on the table and a goal of 3.5 crore jobs, it promises transformation. But here’s the catch: if ELI actually works, it may cost much more than budgeted. That’s the paradox at its heart — and the starting point for this article.

With ₹99,446 crore on the table and 3.5 crore jobs targeted over two years, ELI represents the kind of bold policy intervention that we hope will work. Will it?

What Exactly Is ELI?

The Employment Linked Incentive scheme works through a simple but powerful premise: pay both employers and employees to create formal jobs, with special focus on first-time workers and manufacturing.

Part A — Employee Incentives: First-time EPFO workers earning up to ₹1 lakh monthly get direct cash payments of up to ₹15,000, split into two installments after 6 and 12 months of continuous employment. The second payment requires completing a financial literacy course.

Part B — Employer Incentives: Companies get ₹1,000- 3000 monthly per additional formal employee for 2 years across all sectors, extended to 4 years for manufacturing. This applies to converting existing informal workers to formal status, not just new hires.

The Coverage: Jobs created between August 1, 2025, and July 31, 2027, qualify for benefits that extend years beyond. Expected beneficiaries: 1.92 crore first-time workers and 2.6 crore additional formal workers.

The Innovation: Unlike previous schemes that subsidized either employees or employers, ELI creates aligned incentives for both parties while targeting the core problem — India’s massive informal economy where 80% of workers lack social security.

Case Study: How ELI Works in Practice

Consider a textile manufacturing unit in Tamil Nadu that decides to expand operations and create 10,000 new jobs at ₹25,000 monthly wages. Here’s how ELI changes the math:

Employee Benefits: Assuming 6,000 of these are first-time EPFO workers, each gets ₹15,000 over 12 months.

• Total employee incentives: ₹9 crore

One 22-year-old new hire says, “₹15,000 is more than I’ve ever saved. If I stick with the job, I can finally help my sister pay her college fees.”

Employer Benefits: All 10,000 qualify as additional formal employees at maximum ₹1,000 monthly subsidy for 4 years (manufacturing).

• Monthly subsidy: ₹1 crore
• Total over 4 years: ₹48 crore

The Bottom Line: Government invests ₹48 crore to create 10,000 formal jobs — roughly ₹0.48 lakh per job over 4 years, or a 12.7% wage subsidy.

📊 Cost to government: ₹0.48 lakh per job. Benefit to economy: 10,000 youth gain formal employment, social security, and skills.

For the employer, this means ₹1 crore monthly support while building a skilled workforce. For workers, it means formal employment with social security plus direct cash incentives. For the economy, it means 10,000 youth moving from unemployment to employment.

The numbers look compelling on paper. But ELI’s success depends on navigating several critical implementation challenges.

The Challenges ELI Faces

The Math Challenge

Here's the uncomfortable math: ₹99,446 crore has been budgeted — but if ELI hits its 3.5 crore jobs target, payouts could cross ₹2 lakh crore. That’s a funding gap of ₹1 lakh crore if ELI succeeds.

Now let’s break it down…

The allocated budget? ₹99,446 crore. This ₹1.03 lakh crore shortfall means ELI becomes financially unsustainable if it succeeds at its primary objective.

If all the 3.5 crore jobs were not manufacturing the shortfall is ₹19,554 crore.

Thus the budget seems to assume that the jobs will be less than 3.5 crores and the assumptions on wage levels and split between manufacturing and non manufacturing needs to be clarified.

Blurry Focus

ELI tries solving youth unemployment (1.92 crore first-timers) and workforce formalization (2.6 crore additional workers) simultaneously. The conversion from informal to formal is unlikely to work unless OSH is strictly enforced.

The OSH Code Delay

The OSH Code is still unimplemented since 2020 after it was announced with much fanfare. The OSH code limits the ability of employers to handle informal workers. Without strict enforcement the carrots given by ELI are not enough to convert informal to formal.

High Trust with Immediate Cashflow

Instead of the high compliance burden and delayed cashflow, there should be a simple self-reporting system like in income tax with random scrutiny and high penalties including some non-bailable jail time for false reporting. In addition, the payouts should be monthly rather than waiting 6–12 months for employee benefits.

State Government Coordination

Success depends on 28 states aligning industrial policies, regulatory efficiency, and skill development systems. Early cooperation looks promising, but sustained coordination across diverse political priorities and administrative capacities remains uncertain.

OJT and The Skill Development Opportunity

ELI creates incentives for youth employment. These youth can build skills with on the job training (OJT) or pay for skill development courses since now they have the money to pay. If 1 crore youth pay ₹1,000 per year that is a ₹1,000 crore revenue opportunity for private sector where they can use AI and government facilities like ITI to upgrade skills and make a profit.

How Project X Could Have Helped ELI

ELI reflects sophisticated policy thinking — but also a familiar flaw in India’s reform playbook: designing transformative programs for the people, but not with them. Structured democratic input was missing, and it shows.

The Math Challenge, OSH enforcement gaps, and compliance burdens we identified could have been anticipated through structured democratic policy innovation.

I am trying to build a consensus around Project X which could be the platform that gives structured democratic input to the policy makers on request or suo moto.

Read The Project X Backstory

In the next article, we will examine how Project X could have been used to get a better ELI. This hypothetical case studay is meant to illustrate the usefulness of a platform like Project X.

Policy reforms are an ongoing process and Project X could be the game changer that India needs.