India’s higher education ecosystem continues to expand, but a recent report reveals a troubling disconnect between qualifications and employment. According to new findings from the Institute for Competitiveness, the Indian affiliate of Harvard’s Institute for Strategy and Competitiveness, only 8.25% of Indian graduates are employed in roles that align with their educational qualifications.
Key Findings: A Deepening Skills-Employment Gap
The analysis, based on the Periodic Labour Force Survey (PLFS), shows a persistent misalignment between the supply of degrees and the demand for skilled roles. Over 50% of graduates are employed in lower-skilled jobs—such as clerks, sales assistants, and machine operators—categorized under Skill Level 2 in the National Classification of Occupations (NCO).
Such roles do not require graduate-level training, leading to overqualification, underutilisation, and ultimately, declining job satisfaction and reduced economic efficiency.
Overqualification in High-Skill Jobs
For occupations classified under Skill Level 4 (which typically require graduate-level education or higher), the data shows:
- 63.26% of individuals possess appropriate qualifications.
- However, 28.12% are working in lower-skill jobs, indicating significant underemployment.
- An additional 38.23% of those in Level 4 roles hold degrees, but the nature of their jobs suggests an oversupply of formal education without a corresponding demand in the labour market.
The mismatch persists across Skill Level 3 as well, with just 8.25% of eligible candidates employed in equivalent roles, while more than half remain in jobs below their qualification level.
Underqualification Also Persists
The report also highlights the issue of underqualification:
- In Skill Level 2 jobs, 8.56% of workers do not hold the requisite formal education.
- Many of these roles are filled by individuals who have gained experience or training through non-formal, vocational, or on-the-job learning.
This underscores the need to strengthen Technical and Vocational Education and Training (TVET) pathways, which remain insufficiently developed in India’s skill development framework.
Regional Disparities and State-Level Challenges
The skills-employment mismatch is particularly acute in high-population states such as:
- Uttar Pradesh
- Bihar
- Madhya Pradesh
- West Bengal
Without targeted interventions, these states risk:
- Persistent underemployment
- Brain drain to urban centres or abroad
- Wasted human capital
- Missed opportunities in industrialisation and economic development
Skill Level 1 Workforce Share – Top vs. Bottom States
| Top 5 (Highest % Skill Level 1) | 2017–18 | 2023–24 | Bottom 5 (Lowest % Skill Level 1) | 2017–18 | 2023–24 |
|---|---|---|---|---|---|
| Bihar | 63.71% | 63.64% | Lakshadweep | 41.80% | 37.92% |
| Meghalaya | 59.20% | 61.16% | Puducherry | 36.94% | 35.69% |
| Jharkhand | 62.56% | 59.74% | Kerala | 36.19% | 32.98% |
| Madhya Pradesh | 60.68% | 58.22% | Chandigarh | 38.15% | 32.71% |
| Rajasthan | 64.49% | 57.29% | Goa | 35.06% | 31.97% |
States like Goa and Kerala have made progress in reducing their Skill Level 1 workforce, while others remain stagnant.
Higher Education: Progress and Pitfalls
Despite improved Gross Enrolment Ratios (GER) at primary levels due to initiatives like Sarva Shiksha Abhiyan and NIPUN Bharat, challenges persist at the higher education level:
- Only 2.17% of India’s population holds Skill Level 4 qualifications.
- Chandigarh leads with 11.21%, followed by Uttarakhand (4.99%) and Puducherry (4.76%).
- States like Bihar (0.45%), Jharkhand (0.70%), and Odisha (0.87%) lag significantly.
Economic Implications of Upskilling
According to the report, upgrading from intermediate to advanced skills can lead to a 149% increase in wages, significantly enhancing personal income and boosting national productivity.
However, to realize this potential, India must:
- Close an ₹88,000 crore funding gap in higher education.
- Increase education spending from 3.06% to 4.89% of the national budget.
Policy Recommendations: Bridging the Mismatch
The report calls for four immediate interventions:
- Granular Skill Data Collection to support evidence-based policymaking.
- Regular Skill Gap Analysis led by Sector Skill Councils and State Missions.
- Updating NCO Codes to reflect changing job roles and future skill demands.
- Integrating PLFS with 4-digit NCO Data for more accurate labour market mapping.
The Road Ahead: India’s Demographic Deadline
India’s demographic dividend—650 million people under the age of 25 (UNFPA, 2023)—represents a powerful opportunity. But by 2046, the ageing population will exceed the number of children aged 0–15, shifting the demographic balance.
To prepare the workforce by 2047, India must:
- Align education with labour market needs.
- Expand access to TVET and vocational training.
- Implement state-specific interventions in populous regions.
- Promote gender-inclusive policies in higher education.
Without strategic reform, a vast majority of India’s young workforce could remain trapped in low-skill, low-wage employment, undermining the country’s economic aspirations.
