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Business News/ Politics / Policy/  Budget targets labour-intensive sectors in jobs push
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Budget targets labour-intensive sectors in jobs push

Finance minister Arun Jaitley reiterates Modi government's resolve to restart labour reform process to promote manufacturing

Arun Jaitley linked several of his budget announcements to the theme of employment generation. Photo: K. Rathankumar/MintPremium
Arun Jaitley linked several of his budget announcements to the theme of employment generation. Photo: K. Rathankumar/Mint

Budget 2017 did not offer a strategy specifically tailored to boosting job creation, but several of its core focus areas have the potential to spur job creation.

The budget placed special emphasis on rural housing and gave a significant push to infrastructure by allocating Rs3.96 trillion for public works; it also proposed the setting up of five special tourism zones. Employment in such job-intensive areas is expected to receive a consequent boost.

In his budget speech, finance minister Arun Jaitley reiterated his government’s commitment to job creation and linked several of his announcements to the theme.

He spoke of the tax breaks offered to micro, small and medium enterprises in manufacturing as well as start-ups and proposed a fiscal stimulus package for the labour-intensive leather and footwear sector. He reiterated his government’s resolve to restart the labour law reform process to promote manufacturing.

“For transportation sector as a whole, including rail, roads, shipping, I have provided Rs2,41,387 crore in 2017-18. This magnitude of investment will spur a huge amount of economic activity across the country and create more job opportunities," Jaitley said. The allocation to the transportation sector is part of the overall infrastructure push by the government.

After the apparel industry, the leather and footwear sectors are the most labour-intensive. Following a prescription by the Economic Survey, the Union budget proposed a stimulus package for the sector. “A special scheme for creating employment in the textile sector has already been launched. A similar scheme will be implemented for the leather and footwear industries," the finance minister said.

The Economic Survey released on Tuesday said India needs to generate jobs that are productive and focus on sectors that provide “bang for buck" in terms of jobs created relative to investment, and can generate exports and growth. The apparel, leather and footwear sectors meet these criteria.

Some 12 million people enter the labour market every year in India, but employment generation has not kept pace with demand, leading to a debate over a phenomenon termed as “jobless growth".

Boosting employment generation is a key electoral plank of the National Democratic Alliance government, which is midway through its five-year term.

Domestic and global economic factors have impeded job creation. A cash crunch following the 8 November demonetization of high-value currency notes has led to job losses in the informal economy, impacting many small manufacturing units.

The micro, small and medium enterprise, or MSME, sector is one of the largest employers
in India, but it is largely informal and cash-driven. This sector has been hit by production losses and loss of employment following demonetization.

Jaitley, in his budget speech, said the corporate tax rate would be reduced from 30% to 25% for companies with an annual turnover of less than Rs50 crore.

“As per data of assessment year 2015-16, there are 6.94 lakh companies filing returns of which 6.67 lakh companies fall in this category and, therefore, percentage-wise 96% of companies will get this benefit of lower taxation. This will make our MSME sector more competitive as compared to large companies. The revenue forgone estimate for this measure is expected to be Rs7,200 crore per annum," the minister said.

For start-ups demanding tax rebates, Jaitley said they will have to pay taxes for three out of seven years only if they make a profit. Until now, start-ups were required to pay taxes for three out five years.

“The budget is short on specific initiatives aimed at directly enabling job creation and accommodating millions of youth entering the workforce every year," said Moorthy K. Uppaluri, managing director of staffing and human resource consulting firm Randstad India. From an overall perspective, he added, “some of the bold moves will further economic growth, resulting in job creation, depending on how well they are executed".

The budget also underlined plans to develop the vocational skills of the young, especially
in rural areas, and the need for labour law reforms to create a conducive atmosphere for job growth.

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Published: 02 Feb 2017, 01:04 AM IST
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