Govt’s Internship Initiative Unique, Will Formalise Process In India: CII’s Chandrajit Banerjee

Finance Minister Nirmala Sitharaman announced a slew of measures aimed at job creation during the Union Budget 2024.

This included incentives to both employers and employees based on their provident fund contributions for the first four years of employment.

The government plans a scheme to provide internship opportunities to 1 crore youth in five years in 500 top companies. An internship allowance of Rs 5,000 per month along with a one-time assistance of Rs 6,000 will be provided. While companies must bear the training cost, 10% of the internship cost can be spent from their corporate social responsibility (CSR) funds. There are also similar incentives for additional employment.

While the idea is a good one, it could pose some operational challenges as 1 crore isn’t a small number.

Chandrajit Banerjee, director general of the industry body Confederation of Indian Industry (CII) told The Core, “I was talking to some of our manufacturing companies, and the feedback that I had was that it is something that can be done. It is done anyway because people do take interns and it would help them to actually train them formally and absorb them.”

Banerjee also spoke about the key takeaways for the industry from the budget and how the plans for internships will formalise the process of apprenticeship in India.

Edited excerpts:

Some days have passed since the Union Budget 2024 was presented. What are your three takeaways from the budget in the context of the economy and where we are right now?

The budget is a big exercise in India, as we all know. Three takeaways, if you ask, one of the things that I was happy about was when the finance minister talked about the macroeconomic parameters, and I think that was a very important thing, I would think that the budget, during the budget, she spoke about bettering the fiscal deficit target better than expected, 4.9% of the GDP (gross domestic product) for the current fiscal and we have also retained the focus on capex. I would imagine that was something which everyone was looking at as to how it would play out, and whether capex would be enough.

The government has done very well to commit itself to the fiscal flight path. Also that it has talked about, you know, which is very important, which really improves our standing in the world and gives much more confidence for the Indian economy. The second part is — pre-budget, we were all talking about how do we get the private sector to pay more in terms of investing more. The government has done that, but it has actually focused a lot on one scheme that was successful — the production-linked incentives (PLI). They looked at something which we have been recommending very strongly, which is the employment-linked incentives (ELI) and ELI, which hopefully will bring in much more employment in the country and production and also the private sector participating in the investment story. I think that's another piece that one sort of stitches together as one looks at the budget.

The third — one of the things that we look at in the budget is India has done extremely well in one reform. I would say that is tax reform and GST (goods and services tax), and the way it has brought about GST over the last few years. And I think when the FM talked about, you know, overhauling, or rather looking at the entire Income Tax Act of 1961 in the next six months, that shows that we are on a path of looking at bringing down the tax complications that existed, the compliance issues, the decrement part of it, so all of that. So that was very, very, very good news. So I would sum it up in three, I would give these to be the top three takeaways for me in the budget.

On PLI that's production link initiatives, and the new one, which is employee-linked initiatives, you're saying that the industry has played a role in suggesting and putting forth this proposition?

Yes, if you see the pre-budget memorandum of hours and our discussions with the policymakers, one of the things that we have been talking about is the PLI, can we have a scheme which is like an ELI which will be linked to incremental employment creation and incentivising that, and for which even production will go ahead, will you are in investment will go ahead, and it's completely for the manufacturing industry. It's good for the manufacturing industry, and also it will lead to some other industries, if it's well linked to, like tourism. This is something that we have been talking about for quite some time.

So the way it is going to play out. The government, for example, has said that there is a process that the government is looking at, I mean, using the employment provident fund as the housing body, making companies use CSR budgets. Is that also something that was proposed, or is it more of an evolution from the government side?

We have been talking about how do we create more employment and employability skilling, and how industry plays a role in it. Industry, of course, will have to partner in it. The ELI scheme is not exactly what we would submit, but obviously the policymakers will deliberate on it. I think this is a very unique proposal. What you mentioned about the internship, and it talks about just 500 companies, the top 500 for one broad student for the next five years. I was doing some maths, it comes to something like about 4,000 interns to be employed annually by these 500 companies. It's something which is not, as I would imagine, you are formalising or putting up a sort of an institutional mechanism. It is so very important to see such great focus on apprenticeship in the budget. I would see this resulting in formalisation in the way interns are encouraged to be taken by the top companies.

You're seeing that this is sort of operationally feasible, as it looks like at this point. From reactions from your own colleagues?

I was talking to some of our manufacturing companies, and the feedback that I had was that it is something that can be done. It is done anyway because people do take interns and it would help them to actually train them formally and absorb them and even if we give them a certificate they get other job opportunities. So I see the numbers — formalisation of the jobs, formalisation of training.

You know, one of the points that was made was by allowing, actually, employers to offset the cost of trading through CSR funds. So you are really putting an enabler there, 10% of the total cost that comes into the training. I would think that this needs to be expanded further. The industry should participate in it strongly. I would even think that we have the opportunity. We have to see how the rules are framed, and that's going to be very critical. I would think that while the focus is on manufacturing, I would think even the construction industry, which is a very, very critical industry, could be included. You know, the cost of 4,000 people that we were talking about to be employed annually by a company paying, say, Rs 15,000 odd compensation per month on an average, say, for instance, what does it mean? It means about Rs 70 crore for the top 500 companies, and Rs 70 crore of internship training. I don't think that's a cost issue at all. That's a great investment to make.

And they can set it off from the CSR budget, which was otherwise perhaps a little restrained?

So 10% of that cost could be put in as the CSR, plus the government is also participating in it. There is encouragement by the government. I would think that we should expand this beyond 500 once we see this pilot working well.

I would imagine, and it's possible, I guess, that companies might do it themselves. I mean, a lot of companies take interns, but maybe not dovetailed into this kind of a scheme.

If it gets dovetailed into a scheme, it gets formalised. Many companies do it. Many companies do employ interns. They need interns, and the interns, in turn, get absorbed. But I would imagine when the rules get formed, there will be some sort of a certification, some sort of recognition, so the mobility for them that, you know, it's not like I've done an internship in a place, and if these guys don't take me, then I'll have to be retrained by someone else. So there is a proper certificate which I can show that I have got this training, this is a certificate, which I have done this internship, my employability, so to say, increases so many fold.

And what's an unfinished agenda point?

I would think that there would have to be going ahead. While there has been a strong focus on agriculture and rural in the budget, I would really like to see, going forward, greater participation of the private sector into the rural economy. This could be, we can think about rural, you know, business enterprises. What could be those ready to which is an easy access to market type of rural, non-agricultural, rural businesses, non-agricultural, rural jobs?

I think that facilitation and collaboration would be very important, and the private sector has a huge role to play in that. And the second, if I may, going forward we would need a very strong tech enablement of our industry. The large companies know how to do it. The digital transformation of companies, of the small and the mid-sized companies' access to capital for digitisation, those will be critical areas of our work as we go along, and I'm sure much of it can come even from outside of the budget.