Dr R Balasubramaniam
Ravi, a young worker in Coimbatore, six months into his first formal job at a small manufacturing unit, recently received a credit of Rs 7,500 in his bank account, separate from his monthly salary. The amount was disbursed automatically following completion of six months of continuous employment. His family had previously been engaged only in informal work, without contracts, provident fund contributions or any documented record of employment, and this was the first occasion on which his employment had been formally recorded and accompanied by a benefit of this kind.
The payment he received is his first installment under Part A of the Pradhan Mantri Viksit Bharat Rozgar Yojana (PM-VBRY), introduced in the Union Budget 2024-25 as part of the Prime Minister’s Package for Employment and Skilling. Under this provision, first time employees joining (Employees’ Provident Fund Organisation) EPFO-registered establishments with monthly earnings below Rs 1 lakh receive a cash incentive of up to Rs 15,000, disbursed in two installments, the first after six months of continuous employment and the second after twelve months, conditional on completion of a financial literacy course through the EPFO portal, and deposited into a savings instrument to build a financial cushion for the worker. For Ravi, these six months were not merely a qualifying period. They were the months in which he gained familiarity with his workplace, acquired the basic skills of his trade and began to build an employment record where none had existed before.
This period mattered for his employer too, a small manufacturing unit that had taken him on as part of its expansion. Part B of PM-VBRY provides that employers who create employment above their existing baseline receive a government contribution of up to Rs 3,000 per additional employee per month, over two years across sectors and over four years in manufacturing. The contribution offsets part of the cost that a firm bears in the early months of a new hire, when onboarding and training are underway and a worker without prior formal experience is still becoming productive. By easing this initial cost, the provision extends the scheme’s reach to small businesses of the kind that employed Ravi. For manufacturing units such as his, the four-year window, twice the standard period, makes a case for firms to expand their workforce alongside investments in automation.
For a country with India’s demographic profile, a young and growing workforce presents an opportunity to drive economic growth through employment-led development toward a Viksit Bharat by 2047. The extent to which new entrants enter formal employment, with access to social security and institutional protections, will influence how the benefits of growth are experienced across households and communities. PM-VBRY, aims to strengthen the bridge from Swatantra Bharat to Samriddha Bharat, and seeks to incentivise the creation of more than 3.5 crore formal jobs over two years.
Since becoming operational, 60 lakh first time employees have joined the formal workforce through the scheme. Of these, 43.26 lakh, nearly 71 per cent, are in the 18 to 30 age group, and 18.04 lakh, close to 30 per cent, are women entering formal employment for the first time. These workers span expert services, engineering, trading, construction, education, healthcare, textiles and hospitality, reflecting uptake across a wide spread of formal establishments.
Beyond the incentive itself, what Ravi has gained through PM-VBRY is an EPFO account and a Universal Account Number, bringing him into a system that provides provident fund contributions, insurance protections and statutory employment benefits. For many first-time formal workers like him, this represents an entry into social security coverage and a structured employment relationship. The six-month continuous employment condition is intended to ensure that jobs created under the scheme translate into genuine career foundations. Sustained formal employment builds transferable skills, instils professional norms and strengthens future employability, generating benefits that extend beyond the period of support provided under the scheme.
The creation of employment opportunities is an important policy objective. Equally important is ensuring that workers like Ravi are able to establish a sustained presence within the formal economy, where employment is accompanied by social security coverage and institutional protections. As more workers complete six months, a year, and beyond in formal jobs, a larger share of the workforce enters the social security net, and small establishments build the habit of formal hiring. With more than 3.5 crore jobs projected under the scheme, this gradual widening of the formal economy is the change PM-VBRY is designed to accelerate.
(The author is Member of NITI Aayog)
