The government is in the process of developing ‘special incentives’ for manufacturing companies that generate ‘a specific level of employment.’ A senior official revealed that the Ministry of Commerce and Industry and the NITI Aayog are actively finalizing the details of a “new policy that will tie incentives for manufacturing units in certain sectors to the direct employment they generate.”
The official mentioned that a working group was previously established to address issues related to employment generation by manufacturing units, and the report is expected to be made public by the end of the month. The sectors likely to be covered by the new policy include automotive, textiles, and leather, collectively employing over 23 million people in the country.
Several states, such as Maharashtra and Andhra Pradesh, have already implemented industrial policies linked to direct employment generation. For instance, Maharashtra’s Package Scheme of Incentives 2013 offers industrial promotion subsidies to micro, small, and medium manufacturing enterprises employing over 1,500 persons. However, these projects must maintain the qualifying direct employment throughout the year, with 75 percent of the employees being local residents. Failure to meet the employment criteria in any month results in the ineligibility for industrial promotion subsidy for that year.
Similarly, Andhra Pradesh’s Industrial Development Policy 2015-2020 designates projects with an investment of at least Rs 500 crore or direct employment generation of 2,000 as mega industries. The state government provides tailored benefits on a case-by-case basis, considering factors such as the project’s ability to generate substantial employment or revenue for the state.
The official mentioned that the government is studying these schemes along with international practices. Various incentives, including tax incentives, are under consideration, and there is a focus on providing customs duty concessions to specific sectors for infrastructure development.
In his Independence Day speech, Prime Minister Narendra Modi emphasized that investments in the manufacturing sector should receive assistance based on new parameters, including the provision of maximum employment. He stated that investors contributing to enterprises with high employment potential would be eligible for a distinct economic package, and the government would formulate new schemes linking support to employment and overall assistance.
