India’s federal cabinet on Tuesday approved an employment-linked incentive (ELI) scheme budgeted at 1 trillion rupees ($11.70 billion), aimed at generating nearly 35 million jobs over two years by offering subsidies to both employers and employees.

Under the scheme, first-time employees will receive one month’s wages of up to 15,000 rupees ($175). Employers will receive up to 3,000 rupees per month for two years for each additional employee with sustained employment for at least six months.

The manufacturing sector will receive extended benefits for another two years, the government added in its statement.

"The benefits of the scheme will apply to jobs created between August 2025 and July 2027," the statement said, adding that nearly 19.2 million beneficiaries are expected to be first-time entrants into the job market.

Prime Minister Narendra Modi first announced the ELI scheme in the federal budget in July 2024 as part of a broader package focussed on job creation, skill development, and other opportunities for roughly 41 million young people.

The package, which has a total outlay of 2 trillion rupees spread over 5 years, was introduced after Modi's party lost several seats in the national elections.

Despite clocking an average annual growth of more than 8 percent over the last four years, unemployment remains a major political challenge in Asia's third-largest economy. The jobless rate has remained higher than 5 percent, with nearly 45 percent of India’s workers still reliant on agriculture.

Unemployment among urban youth aged 15 to 29 years rose to 17.9 percent in May from 17.2 percent in April, while in rural areas, youth unemployment climbed to 13.7 percent from 12.3 percent in the same period.