Discussing the details of the initiative, Prime Minister Narendra Modi said at an even organized by Bloomberg: “This will create a positive externality. It will provide a rich database which can be used by private sector employers as a readymade and objective sourcing and screening mechanism. It will reduce search costs in the labor market for both employers and employees. It will enable better matching of candidates from labor surplus areas with jobs in other regions.”
He also listed other measures the government has adopted for employment generation. India is a capital-scarce, labor-abundant country, he said. “Yet, the corporate tax structure has favored capital-intensive production. Tax benefits like accelerated depreciation, and investment allowance have created an artificial bias against labor. Labor regulations have also tended to promote informal employment without social protection, rather than formal employment. We have taken two important steps to change this.”
Firstly, if any firm subject to tax audit increases its work force, it will get a 30 per cent weighted tax deduction on the extra wage cost for three years. Earlier, such a benefit was available only to very few industrial employers and had so many restrictions that it was practically ineffective. It will now cover all sectors including services, for employees with a salary up to 25,000 rupees per month, the Prime Minister said.
Secondly, the government has taken the responsibility for paying pension contributions for three years for all new persons enrolling in the Employee Provident Fund, he said. This will apply to those with wages up to Rs 15,000 per month. We expect lakhs of the unemployed, and the informally employed, to benefit from these steps.
“In a reform to eliminate corruption in government recruitments, we have abolished interviews for lower- and middle-level positions,” Modi said. “They will now be filled on the basis of transparent examination results.”