Expand the ELI program to encompass skill-building facets

Expand the ELI program to encompass skill-building facets

The Employment Linked Incentive (ELI) framework, launched by the Indian government on August 1 with an outlay of ₹99,446 crore, has the potential to revolutionise employment opportunities in the country. The goal is to create 3.5 crore new jobs over the next two years, a significant step towards transitioning informal labor into formal frameworks, expanding the tax base, and strengthening social security coverage.

To effectively address structural, demographic, and multifaceted employment challenges, the ELI must be reimagined as a more inclusive, skill-linked, and sector-agnostic framework. Here's how:

1. Integration of Skill Development Programs The ELI scheme already aims to improve employability alongside job creation by linking incentives to formal employment growth and successful completion of financial literacy programs under EPFO registration. To further address employment challenges, the framework can be expanded to systematically integrate with existing government skill development initiatives such as PMKVY and Skill India. This alignment will ensure that workers are better prepared for both formal sector jobs and flexible employment arrangements.
2. Inclusion of the Gig Economy and Informal Sector Workers The current ELI framework focuses primarily on formal wage employment registered through EPFO. However, a significant portion of India’s workforce is engaged in gig, freelance, and platform-based work, often outside EPFO coverage. Reimagining ELI to incentivize formalization and social security coverage for gig workers can address this gap.
3. Focus on Rural Enterprises and Employment Given India's large rural population and numerous small rural enterprises, the ELI scheme can be adapted to specifically incentivize employment generation in rural MSMEs and agricultural allied sectors. Combining job creation incentives with targeted skill development in rural contexts can tackle demographic challenges and structural unemployment in non-urban areas.
4. Integration with Government Skilling Architecture The ELI scheme is envisioned as part of a broader ecosystem including internship and skill development initiatives. A more integrated framework would involve mechanisms for sharing data, joint monitoring, and co-financing between ELI and schemes administered by the Ministry of Skill Development and Entrepreneurship.
5. Sustainable Employment and Social Security The ELI’s requirement of six months’ continuous employment before incentives are disbursed is a step towards ensuring job sustainability. This can be reinforced by linking incentives to continued upskilling and social security enrollment, ensuring that employment is not only created but also durable and dignified, with rights-based protections.

By adopting these measures, the ELI framework can be transformed into a more inclusive and comprehensive policy that accommodates India’s vast demographic diversity, supports multiple forms of employment, and leverages existing skill development infrastructure for lasting impact on formal employment and social security coverage.

It's worth noting that such an approach has strong international precedents, such as Singapore's Jobs Growth Incentive (JGI), the US' Work Opportunity Tax Credit (WOTC), and Germany's vocational training system. An annual review mechanism must be established to assess sector-wise absorption, facilitate course correction, and ensure alignment with rapidly changing employment trends, particularly in technology and services.

The gig and platform economy, projected to have over 23.5 million workers by 2030, is currently overlooked by the ELI scheme. A unified digital platform should be created to enable employers to register new hires, upload skill certification data, and claim benefits with minimal paperwork. Employers hiring candidates trained through recognised programs should be offered a special income tax rate for employment-intensive skills.

The ELI scheme must be extended to non-urban areas, as there is immense job-creation potential in rural areas through food processing clusters, handloom cooperatives, and micro-enterprises. Food delivery platforms, ride-hailing services, freelance digital marketplaces, and e-commerce logistics already employ hundreds of thousands of youth in the gig economy.

The writer is a Co-Founder and MD of Orane International, a training partner with the National Skill Development Corporation (NSDC). This article was published on August 6, 2025.

[1] Ministry of Labour and Employment. (2023). Employment Linked Incentive Scheme. Retrieved from www.mol.gov.in/eli [2] EPFO. (2024). Employer's Contribution and Other Details. Retrieved from www.epfindia.gov.in [3] National Skill Development Corporation. (2023). Skill India Mission. Retrieved from www.nsdcindia.org [4] Prime Minister's Employment Generation Programme. (2023). About Us. Retrieved from www.pmgep.gov.in [5] Ministry of Skill Development and Entrepreneurship. (2023). National Apprenticeship Promotion Scheme. Retrieved from www.msde.gov.in/naps

1. To enhance the effectiveness of the Employment Linked Incentive (ELI) scheme, it would be beneficial to integrate it with existing government programs like PMKVY, Skill India, and the National Apprenticeship Promotion Scheme under the Ministry of Skill Development and Entrepreneurship.
2. It is important to expand the ELI framework to incorporate informal sector workers, gig workers, and freelancers to provide them with formal employment opportunities and ensure social security coverage.
3. Given the vast rural demographic and numerous small rural enterprises, the ELI scheme should be tailored to incentivize employment generation in rural MSMEs and agricultural allied sectors.
4. The ELI scheme's potential impact can be augmented by linking incentives to continued upskilling and social security enrollment for a more sustainable and dignified employment growth.
5. As part of an annual review mechanism, the ELI framework should assess sector-wise absorption and align with rapidly changing employment trends, especially in technology and services.
6. To facilitate seamless implementation and minimize paperwork, a unified digital platform should be developed for employers to register new hires, upload skill certification data, and claim benefits, with tax incentives offered for employment-intensive skills.

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