The policy is likely to be announced in the upcoming Budget, the last full one that will be presented by this government before general elections in 2019.
The multi-pronged employment policy will include incentives for employers to create more jobs, reforms to attract enterprises and help for medium and small scale industries, which are major job providers, a senior government official told ET.
The idea is to address the twin issues of providing quality jobs to over 10 million youth being added to the country's workforce every year and ensuring that more of these are created in the formal sector. As of now, barely 10% of the country's 400 million workforce is in the organised sector.
"The policy will moot fiscal incentives for employers across labourintensive sectors to create more jobs as well as employees to get engaged in the organised sector as this would fetch them minimum wages and enough social security," the official said.
The plan comes amid rising pressure to speed up job creation in sync with economic growth so that incomes rise and millions of people are lifted out of poverty.
"Economic growth would need capacity building in infrastructure, commodities, manufacturing, consumer goods and services and each of these sectors will create new jobs and upgraded jobs," said MS Unnikrishnan, chairman of the national committee on industrial relations at the Confederation of Indian Industry. "In light of this, we need to have a flexible employment policy that protects the interest of both employer and employee. This means it has to be viable and attractive for investors and provide for a social security system for our workers."
The pace of job creation fell to a six-year low in 2015 with 135,000 new jobs being created compared with 421,000 in 2014 and 419,000 in 2013, according to a quarterly survey of industries by the Labour Bureau of the labour ministry.
Another survey of households conducted by the Labour Bureau showed unemployment rate rising to a five-year high of 5% in FY16 compared with 4.9% in FY14 and 4.7% in FY13.
About 90% of workers are engaged in informal employment, not covered by any social security law and most likely not getting the minimum wage. The policy will seek to reverse the trend.
The government is assessing the current employment situation in the country, including the macroeconomic environment, demographic context and sectoral employment generation challenges and constraints, following which it will set targets and monitor them.