Introduction
India has made notable progress in expanding access to education over the past two decades. According to government estimates, the Gross Enrolment Ratio (GER) in higher education increased from around 11 percent in the mid-2000s to over 28 percent by 2022. Each year, more than 12 million students graduate from universities and colleges across the country. Education is therefore widely regarded as the primary route to stable employment and upward mobility.
However, labour-market outcomes increasingly suggest that higher educational attainment does not guarantee suitable employment. Recent employment data indicate that educated youth face higher unemployment and underemployment than their less-educated counterparts. This widening gap between educational eligibility and job outcomes has become a central concern for policymakers, economists, and educators alike.
Unemployment Rates by Educational Level
One of the most shocking features of India’s labour market is the inverse relationship between education and unemployment. Data from the International Labour Organization (ILO, 2024) show that unemployment among Indian youth aged 15–29 stood at approximately 23 percent, but the rate rose sharply with higher levels of education.
Among individuals with tertiary (graduate and postgraduate) education, unemployment was estimated at around 29 percent, compared to 6–7 percent among those with primary education and about 3–4 percent among individuals with no formal schooling. This pattern highlights a structural imbalance: while less-educated workers are readily absorbed into informal employment, educated individuals struggle to find jobs that match their qualifications. This encourages students seeking jobs outside the country thus creating loss of possible human resources in India.
These figures do not suggest that low-educated workers enjoy better job quality; rather, they point to the limited availability of formal, skill-appropriate employment for graduates.
Underemployment and Qualification Mismatch
The fact is even when employment is secured, job quality remains a concern. Studies on graduate employment indicate that only 8–10 percent of Indian graduates are employed in positions that require a university degree. The remaining majority are engaged in occupations such as clerical work, retail, sales, and basic service roles, where educational requirements are significantly lower.
According to the Institute for Competitiveness, nearly 50 percent of graduates are employed in low-skill or semi-skill occupations, suggesting a widespread mismatch between educational qualifications and occupational roles. This less use of skills contributes to wage compression and limits career progression, particularly during the early years of employment.
Underemployment also affects long-term productivity. When educated workers are unable to apply their skills, the economic returns on higher education — both private and public are substantially reduced.
Employability and Skill Deficits
A key reason for this mismatch lies in the gap between academic education and employable skills. Employer surveys consistently indicate that only around 45–50 percent of Indian graduates are considered readily employable without additional training.
Deficiencies are particularly evident in areas such as communication, problem-solving, digital literacy, and applied technical skills. For example, national employability assessments suggest that fewer than half of engineering graduates meet industry standards in emerging technology fields such as data analytics, artificial intelligence, and cybersecurity.
These skill gaps are closely linked to the structure of higher education. Many universities continue to follow curricula that are revised infrequently, with limited emphasis on internships, project-based learning, or industry collaboration. As a result, graduates often enter the labour market with theoretical knowledge but little practical exposure.
Limited Role of Vocational Education
Vocational and technical education remains underutilised in India. According to national estimates, less than 6 percent of the workforce has received formal vocational training, compared to over 50 percent in several developed economies. This limits pathways into mid-skill occupations that could otherwise absorb a large share of educated youth.
Moreover, vocational education continues to be socially perceived as inferior to academic degrees. This perception discourages students from pursuing skill-oriented training, even when such training may offer higher employment probabilities.
Job Creation and Sectoral Constraints
On the demand side, the pace of job creation has been insufficient to match the growing supply of educated labour. Although India has recorded steady GDP growth, employment growth has been concentrated in low-productivity sectors.
Approximately 85–90 percent of India’s workforce is employed in the informal sector, where jobs typically offer low wages, limited security, and minimal skill utilisation. Recent labour force data indicate that over 30 percent of informal workers have completed secondary or higher education, highlighting the growing presence of educated individuals in informal employment.
Meanwhile, sectors capable of absorbing skilled labour — such as manufacturing and modern services — have expanded at a slower pace. Manufacturing’s share of total employment has remained around 11–12 percent, limiting its role as a large-scale employment generator for educated youth.
Gender and Regional Disparities
Gender disparities further deepen the education–employment gap. Labour force data show that educated women are nearly twice as likely to be unemployed as educated men. Among graduate women aged 20–29, unemployment rates have been estimated at over 40 percent in some survey rounds. Social norms, safety concerns, and unequal care responsibilities continue to restrict women’s labour-market participation.
Regional inequalities are also significant. States with weaker industrial bases and lower private investment exhibit higher rates of educated unemployment. Rural graduates, in particular, face limited access to formal employment and often accept work unrelated to their qualifications or exit the labour force altogether.
Assessment of Policy Interventions
India has introduced several initiatives aimed at improving employability. Under the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), millions of individuals have received short-term training. However, government data indicate that only about 15–20 percent of trained candidates secure wage employment within a year of completing training, raising concerns about programme effectiveness.
The National Education Policy (NEP) 2020 aims to address structural weaknesses by promoting multidisciplinary education, early skill exposure, and flexibility. While the policy framework aligns with labour-market needs, its success depends on effective implementation, particularly in public institutions and rural regions.
Conclusion
Available data clearly indicate that India’s employment challenge is not one of insufficient education, but of inadequate alignment between education and labour-market demand. High unemployment and underemployment among graduates, low employability rates, and limited formal job creation point to structural weaknesses that extend beyond individual qualifications.
Bridging this gap requires coordinated reforms across education policy, skill development, and industrial strategy. Without such alignment, India risks continued underutilization of its educated workforce, undermining both economic growth and social mobility.
References
- International Labour Organization (2024). Global Employment Trends for Youth.
- Ministry of Statistics and Programme Implementation (MOSPI). Periodic Labour Force Survey (PLFS) Reports.
- Institute for Competitiveness. Graduate Employment and Skill Mismatch in India.
- Economic Times (Government Data). PMKVY Employment Outcomes.
- Government of India. National Education Policy 2020.
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