Issues in India’s Skilling Ecosystem

Context

Despite massive public investment in skilling over the last decade, India’s skilling ecosystem has not translated into aspirational or high-quality employment outcomes.

Why Does India Need Skilling?

Demographic & Economic Reasons

• Demographic Dividend: With a median age of 28, India has a 2–3 decade window to convert its massive young population into an economic asset.
• Employability Gap: According to the India Skills Report 2025, while graduate employability has risen to 54.81%, nearly half of the graduates still lack the specific skills required by modern industry.
• Digital Transformation: The rise of AI and the “Gig Economy” requires workers to have 21st-century skills (Critical thinking, Collaboration) to avoid being left behind.

Social & Governance Reasons

• Employment-led Growth instead of degree inflation.
• Dignity of Labour and reduction in educated unemployment.
• Inclusive Growth for school dropouts, informal workers, women, and migrants.

Key Statistics on India’s Skilling Landscape

• Demographic Profile: 65% of India’s population is under 35 years of age, with a median age of 28.
• Employability Growth: The percentage of employable youth has improved from 34% to 51.3% over the last decade.
• Training Reach (PMKVY): Since 2015, the Pradhan Mantri Kaushal Vikas Yojana has trained 42 crore individuals, with 1.13 crore receiving certification.
• Gender Inclusivity: Female participation in PMKVY increased from 7% (FY16) to 52.3% (FY24). In Industrial Training Institutes (ITIs), it rose from 9.8% to 13.3%.
• Vocational Network: There are 14,955 ITIs across the country under the Craftsmen Training Scheme (CTS).
• Skill India Digital Hub: Launched in August 2023, it has over 60 lakh registered learners and 8.4 lakh app downloads.

Government Initiatives (2025–2026)

• Skill India Programme (SIP) 2026: Recently restructured with an outlay of ₹8,800 crore (2022–2026), consolidating PMKVY 4.0, NAPS, and Jan Shikshan Sansthan (JSS).
• PM-SETU (Skilling and Employability Transformation through Upgraded ITIs): A flagship ₹60,000 crore scheme launched in 2025 to upgrade 1,000 ITIs via a “Hub-and-Spoke” model, where industry holds 51% ownership in governance.
• PMKVY (Pradhan Mantri Kaushal Vikas Yojana): Focuses on Industry 4.0 skills like AI, Robotics, IoT, and Drones, moving away from simple classroom learning to more practical, on-the-job training.
• SOAR (Skilling for AI Readiness): A new initiative to embed AI literacy in schools (Classes 6–12) to ensure the next generation is future-ready.
• National Apprenticeship Promotion Scheme (NAPS): Incentivizes industries to hire apprentices by providing 25% of the stipend (up to ₹1,500/month) via Direct Benefit Transfer (DBT).
• Skill India International Centres (SIIC): 30 centres are being established (e.g., Varanasi and Bhubaneswar) to enhance international mobility.
• Global Partnerships: MoUs signed with countries like Australia, Germany, Japan, UAE, and the UK for standard setting and mutual recognition of qualifications.
• Skill Impact Bond: A result-based finance model targeting the training of 50,000 youth with a focus on job retention.

Issues in Skilling India

• Low Formal Training Penetration: According to the Periodic Labour Force Survey (PLFS) 2025, only about 1% of India’s workforce has received formal vocational training.
  • This is a marginal increase from 2% a decade ago and pales in comparison to South Korea (96%) or Germany (75%).
• Fragmented Accountability of Sector Skill Councils (SSCs): SSCs were intended to own the “job-readiness” of candidates.
  • However, today the system is disjointed: one entity trains, another assesses, and a third certifies.
  • This lack of a “single point of accountability” means certifications often lack the trust and “signalling value” required by employers.
• Low Placement and Wage Premium: Only about 18% of candidates trained under PMKVY (out of 1.4 crore) have secured formal placements.
  • Furthermore, vocational training in the informal sector (where the majority are absorbed) offers negligible wage gains, making skilling a “transactional” rather than “aspirational” choice.
• Industry as a Bystander: Most Indian employers (outside of large corporations) do not use public skilling certifications as hiring benchmarks.
  • High attrition rates of 30–40% in sectors like retail and logistics highlight a mismatch between what is taught and what the industry actually needs.
• The “Degree Over Skill” Paradox: Social mobility in India remains tied to degrees.
  • The India Skills Report 2025 shows that only 2% of graduates pursue additional skilling certifications post-degree, as skills are viewed as a “fallback” for those who fail traditional education rather than an “add-on” for excellence.

Way Forward

• Integrate skills with formal education: By embedding vocational credits into UG, diploma, and polytechnic programmes to support the National Education Policy 2020 target of increasing Gross Enrolment Ratio from 28% to 50% by 2035.
• Outcome-Linked Funding for SSCs: Government funding for training providers and SSCs should be tied to long-term employment (retention of 6+ months) and wage growth of the candidates, rather than just the number of certificates issued.
• Scaling the Apprenticeship Model (NAPS 2.0): By scaling the National Apprenticeship Promotion Scheme and prioritising MSMEs, which employ ~110 million workers, to shift training from classrooms to workplace-based learning.
• Focus on “Green” and “New-Age” Skills: Prioritize high-growth sectors like AI, Semiconductors, and Green Hydrogen. The India Skills Report 2026 highlights that AI-intensive roles are projected to drive a $17 billion market in India by 2027.

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